Problem 12-6A Liquidation of a partnership LO P5

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.

Balance Sheet
Assets				Liabilities
Cash	$	103,600		Accounts payable	$	252,500
Inventory		536,400		Equity
				Kendra, Capital		77,500
				Cogley, Capital		174,375
				Mei, Capital		135,625
Total assets	$	640,000		Total liabilities and equity	$	640,000

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.) 4. Inventory is sold for $276,600 and partners with deficits do not pay their deficits.

Required 4 Inventory

• Required 4 GJ

Complete the schedule allocating the gain or loss on the sale of inventory $276,600 and partners with deficits do not pay their deficits.

Step 1) Determination of gain (loss)
Proceeds from the sale of inventory			$276,600
Inventory cost			536,400
Loss on sale			$(259,800)
Step 2) Allocation of the gain (loss) to the partners and distribution of deficit(s)
		KENDRA		COGLEY		MEI	Total
Initial capital balances		$77,500		$174,375		$135,625	$387,500
Allocation of gains (losses)	3 / 6		2 / 6		1 / 6		0
Capital balances after gains (losses)		77,500		174,375		135,625	387,500
Allocation of deficit balance							0
Capital balances after deficit allocation		$77,500		$174,375		$135,625	$387,500