Kendra, Cogley, and Mei share income and loss in a 3:2:1 ratio (in ratio form: Kendra, 3/6; Cogley, 2/6; and Mei, 1/6). The partners have decided to liquidate their partnership. On the day of liquidation, their balance sheet appears as follows. Assets Cash Inventory $245,500 $180,800 537,200 Balance Sheet Liabilities Accounts payable Equity Kendra, Capital Cogley, Capital Mei, Capital Total liabilities and equity 93,000 212,500 167,000 $ 718,000 Total assets $718,000 Required: For each of the following scenarios, complete the schedule allocating the gain or loss on the sale of inventory. Prepare journal entries to record the below transactions. (Do not round intermediate calculations. Enter losses and partner deficits, if any, as negative amounts.) 1. Inventory is sold for $600,000. 2. Inventory is sold for $500,000. 3. Inventory is sold for $320,000 and partners with deficits pay their deficits in cash. 4. Inventory is sold for $250,000 and partners with deficits do not pay their deficits. Required 1 Inventory Required 1 GJ Required 2 Inventory Required 2 GJ Required 3 Inventory Required 3 GJ Required 4 Inventory Required 4 GJ Complete the schedule allocating the gain or loss on the sale of inventory is $600,000. Step 1) Determination of Gain (Loss) Proceeds from the sale of inventory Inventory cost $ 600,000 COGLEY MEI Total Step 2) Allocation of the Gain (Loss) to the Partners. KENDRA Initial capital balances $ 93,000 Allocation of gains (losses) Capital balances after gains (losses) $ 93,000 212,500 $ 167,000 $ 472,500 0 $ 212,500 167,000 $ 472,500 Journal entry worksheet Record the sale of inventory. Note: Enter debits before credits. Transaction General Journal Debit Credit (a) 600,000 600,000 Record entry Clear entry View general journal Journal entry worksheet Allocate the gain(loss) on the sale of inventory to the partners. Note: Enter debits before credits. Transaction General Journal Debit Credit (b) Record entry Clear entry View general journal Journal entry worksheet Record the payment of the liabilities. Note: Enter debits before credits. Transaction General Journal Debit Credit (c) Record entry Clear entry View general journal Journal entry worksheet Record the disbursement of the remaining cash to the partners. Note: Enter debits before credits. Transaction General Journal Debit Credit (d) Record entry Clear entry View general journal Required 1 Inventory Required 1 GJ Required 2 Inventory Required 2 GJ Required 3 Inventory Required 3 GJ Required 4 Inventory Required 4 GJ Complete the schedule allocating the gain or loss on the sale of inventory is $500,000. Step 1) Determination of Gain (Loss) Proceeds from the sale of inventory Inventory cost $ 500,000 COGLEY MEI Total Step 2) Allocation of the Gain (Loss) to the Partners. KENDRA Initial capital balances 93,000 Allocation of gains (losses) Capital balances after gains (losses) $ 93,000 212,500 $ 167,000 $ 472,500 0 $ 212,500 $ 167,000 $ 472,500 Complete the schedule allocating the gain or loss on the sale of inventory $250,000 and partners with deficits do not pay their deficits. Step 1) Determination of Gain (Loss) Proceeds from the sale of inventory Inventory cost $ 250,000 MEI Total $ 167,000 $ 472,500 Step 2) Allocation of the Gain (Loss) to the Partners and Distribution of deficit(s) KENDRA COGLEY Initial capital balances $ 93,000 $ 212,500 Allocation of gains (losses) Capital balances after gains (losses) 93,000 212,500 Allocation of deficit balance Capital balances after deficit allocation 93,000 $ 212,500 0 167,000 472,500 0 $ 167,000 $ 472,500
