Barnes Company at December 31 has cash $40,000, non-cash assets $200,000, liabilities $110,000, and the following capital balances: Carpenter $90,000 and Pendleton $40,000. The firm is liquidated, and $240,000 in cash is received for the non-cash assets. Carpenter and Pendleton income ratios are 60% and 40%, respectively.

Instructions

Prepare a cash distribution schedule.

BARNES COMPANY

Schedule of Cash Payments

Non-cash Carpenter Pendelton

Cash + Assets = Liabilities + Capital + Capital

Balances before

Liquidation $ ________ $_______ $_______ $ _______ $_______

Sale of noncash assets

and allocation of gain _______ _________ ________ ______ ______

New balances ________ ________ ________ ________ ________

Pay liabilities ________ _____ ________

New balances _______ __ ___ ______ ______

Cash distribution ($170,000) ($114,000) ($56,000)

Final balances $___0____ $ 0 $ 0 $___0____ $___0____

Follow the necessary steps to journalize the liquidation of the partnership.

(1) Sell Non-Cash Assets for Cash & Recognize a Loss or Gain on Realization

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(2) Allocate gain/loss on realization to the partners based on their income ratios.

(3) Pay partnership liabilities in cash.

(4) Distribute remaining cash to partners on the basis of their capital balances.

III. Allocation of Cash Dividends to Preferred and Common Stockholders (10 points)

Holland Corporation was organized on January 1, 2007. During its first year, the corporation issued 65,000 shares of $5 par value preferred stock and 375,000 shares of $1 par value common stock. At December 31, the company declared the following cash dividends:

2007 $12,500

2008 $35,000

2009 $90,000

Instructions

(a) Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 5% and not cumulative.

(b) Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 7% and cumulative.

(c) Journalize the declaration of the cash dividend at December 31, 2009 using the assumption of part (b).

Solution

(a) Preferred Common Total

2007 $______ $_______ $_______

2008 _______ ________ _______

2009 _______ _______ _______

(b) Preferred Common Total

2007 $_______ $________ $________

2008 ________ _________ _________

2009 ________ _________ _________

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