Question
Alex and Bess have been in partnership for many years. The partners, who share profits and losses on a 60:40 basis, respectively, wish to retire
Alex and Bess have been in partnership for many years. The partners, who share profits and losses on a 60:40 basis, respectively, wish to retire and have agreed to liquidate the business. Liquidation expenses are estimated to be $5,500. At the date the partnership ceases operations, the balance sheet is as follows:
Cash | $ | 51,000 | Liabilities | $ | 40,500 |
Noncash assets | 100,000 | Alex, capital | 60,000 | ||
Bess, capital | 50,500 | ||||
Total assets | $ | 151,000 | Total liabilities and capital | $ | 151,000 |
Part A: Prepare journal entries for the following transactions that occurred in chronological order:
a. Distributed safe cash payments to the partners.
b. Paid $24,300 of the partnerships liabilities.
c. Sold noncash assets for $110,500.
d. Distributed safe cash payments to the partners.
e. Paid remaining partnership liabilities of $16,200.
f. Paid $4,400 in liquidation expenses; no further expenses will be incurred.
g. Distributed remaining cash held by the business to the partners.
Part B: Prepare a final statement of partnership liquidation.
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