Question
On January 1, 2016, Smith, Brown and Green formed a partnership. The following capital contributions were made: Smith $40,000 Brown $50,000 Green $30,000 The partnership
On January 1, 2016, Smith, Brown and Green formed a partnership. The following capital contributions were made:
Smith $40,000
Brown $50,000
Green $30,000
The partnership agreement stated that profit will be allocated based on the ratio of capital contributions.
For its fiscal year ended December 31, 2016, the partnership had a profit of $15,000.
On January 1, 2017, due to a dispute between the partners, they decided to liquidate the partnership. The following assets and liabilities were on the balance sheet as of December 31, 2016.
Cash $60,000
Inventory 65,000
Other Assets 35,000
Accounts Payable 25,000
The partnership sold the inventory for $20,000 and Other Assets for $5,000 on January 11, 2017.
Required: 1) Prepare the journal entry to allocate the 2016 profit to each partner.
2) Prepare the journal entries to record the following:
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sale of Inventory,
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sale of Other Assets,
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allocation of gain or loss to the partners,
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payment to the creditors and
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distribution of remaining cash to the partners.
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
