Lui, Montavo, and Johnson plan to liquidate their Premium Pool and Spa business. They have always shared profit and losses in a 1:4:5 ratio, and on the day of the liquidation their balance sheet appeared as follows:
$ 71,250 $600,750 143,000 457,750 $529,000 Premium Pool and Spa Balance Sheet June 30, 2020 Assets Cash Machinery Less: Accumulated depreciation Total assets Liabilities Accounts payable Equity Jim Lui Kent Montavo, capital Dave Johnson, capital Total equity Total liabilities and equity $137,500 $ 76,900 201,500 113,100 391,500 $529,000 Required: 1. Under the assumption that the machinery is sold and the cash is distributed to the proper parties on June 30, 2020, complete the schedule provided below. Show the sale, the gain or loss allocation, and the distribution of the cash in each of the following unrelated cases: a. The machinery is sold for $500,000. (Negative answers should be indicated by a minus sign.) Premium Pool and Spa June 30, 2020 Accum. Machinery Deprec., Machinery Cash Accounts Payable Jim Lui, Capital Kent Montavo, Capital Dave Johnson, Capital Account balances June 30, 2020 Sale of Machinery for $500,000 Balance Payment of liabilities Balance Distribution of cash to partners Balance b. The machinery is sold for $387,000. (Negative answers should be indicated by a minus sign.) Premium Pool and Spa June 30, 2020 Cash Machinery Accum. Deprec., Machinery Accounts Payable Jim Lui, Capital Kent Montavo, Capital Dave Johnson Capital Account balances June 30, 2020 Sale of Machinery for $387,000 Balance Payment of liabilities Balance Distribution of cash to partners Balance c. The machinery is sold for $207,000, and any partners with resulting deficits can and do pay in the amount of their deficits. (Negative answers should be indicated by a minus sign.) Premium Pool and Spa June 30, 2020 Accum. Machinery Deprec.. Machinery Cash Accounts Payable Jim Lui, Capital Kent Montavo, Capital Dave Johnson, Capital Account balances June 30, 2020 Sale of Machinery for $207,000 Balance Payment of liabilities Balance Johnson pays deficiency Balance Distribution of cash to partners Balance d. The machinery is sold for $199,000, and the partners have no assets other than those invested in the business. (Negative answers should be indicated by a minus sign.) Premium Pool and Spa June 30, 2020 Cash Machinery Accum. Deprec. Machinery Accounts Payable Jim Lui, Capital Kent Montavo, Capital Dave Johnson, Capital Account balances June 30, 2020 Sale of Machinery for $199,000 Balance Payment of liabilities Balance Allocation of deficiency Balance Distribution of cash to partners Balance 2. Prepare the entry to record the final distribution of cash assuming the machinery is sold for $500,000. View transaction list Journal entry worksheet Record the final distribution of cash to the partners. Note: Enter debits before credits. Date General Journal Debit Credit June 30, 2020 Record entry Clear entry View general journal
