Question
Joe, Jim, and Jay have been partners for several years. The partners allocate all profits and losses on a 4:4:2 basis, respectively. Now, each partner
Joe, Jim, and Jay have been partners for several years. The partners allocate all profits and losses on a 4:4:2 basis, respectively. Now, each partner has become personally insolvent and, the three partners have decided to liquidate the business in hopes of solving their personal financial issues. As of September 1, the partnerships balance sheet is as follows:
Assets |
|
| Liabilities and Capital |
|
|
Cash | $ | 35,000 | Liabilities | $ | 131,000 |
Accounts receivable |
| 132,000 | Joe, capital |
| 60,000 |
Inventory |
| 122,000 | Jim, capital |
| 99,000 |
Land, building, and equipment (net) |
| 71,000 | Jay, capital |
| 70,000 |
Total assets | $ | 360,000 | Total liabilities and capital | $ | 360,000 |
Required:
Prepare journal entries for the following transactions (if no entry is required for a transaction/ event, indicate "No journal entry required"):
- Sold all inventory for $80,000 cash (1 point).
- Paid $14,700 in liquidation expenses (1 point).
- Paid $64,000 of the partnerships liabilities (1 point).
- Collected $84,000 of the accounts receivable (1 point).
- Distributed safe cash balances; the partners anticipate no further liquidation expenses (5 points).
- Sold remaining accounts receivable for 35 percent of face value (2 points).
- Sold land, building, and equipment for $41,000 (1 point).
- Paid all remaining liabilities of the partnership (1 point).
- Distributed cash held by the business to the partners (2 points).
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