Problem 12-6A Liquidation of a partnership LO P5

Kendra, Cogley, and Mei share income and loss in a 3:2:1 ratio. The partners have decided to liquidate their partnership. On the day of liquidation their balance sheet appears as follows.

KENDRA, COGLEY, AND MEI Balance Sheet May 31
Assets				Liabilities and Equity
Cash	$	93,400		Accounts payable	$	247,000
Inventory		537,600		Kendra, Capital		76,800
				Cogley, Capital		172,800
				Mei, Capital		134,400
Total assets	$	631,000		Total liabilities and equity	$	631,000

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. Amounts to be deducted or Losses should be entered with a minus sign. Round your final answers to the nearest whole dollar.)

(3) Inventory is sold for $327,600 and any partners with capital deficits pay in the amount of their deficits. (4) Inventory is sold for $259,800 and the partners have no assets other than those invested in the partnership.

Complete the schedule allocating the gain or loss on the sale of inventory is $327,600 and any partners with capital deficits pay in the amount of their deficits.

Step 1) Determination of Gain (Loss)
Proceeds from the sale of inventory		$327,600
Inventory cost
Step 2) Allocation of the Gain (Loss) to the Partners.
		KENDRA		COGLEY		MEI	Total
Initial capital balances		$76,800		$172,800		$134,400	$384,000
Allocation of gains (losses)							0
Capital balances after gains (losses)		$76,800		$172,800		$134,400	$384,000

Journal entry worksheet

Record the sale of inventory.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
(a)

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-1)

Journal entry worksheet

The partner(s) with deficit balances repay the amount of their deficit(s).

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
(b-2)

Journal entry worksheet

Record the payment of the liabilities.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
(c)

Journal entry worksheet

Record the disbursement of the remaining cash to the partners.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
(d)

Complete the schedule allocating the gain or loss on the sale of inventory $259,800 and the partners have no assets other than those invested in the partnership.

Step 1) Determination of gain (loss)
Proceeds from the sale of inventory		$259,800
Inventory Cost
Step 2) Allocation of the gain (loss) to the partners and distribution of deficit(s)
		KENDRA		COGLEY		MEI	Total
Initial capital balances		$76,800		$172,800		$134,400	$384,000
Allocation of gains (losses)							0
Capital balances after gains (losses)		76,800		172,800		134,400	384,000
Allocation of deficit balance							0
Capital balances after deficit allocation		$76,800		$172,800		$134,400	$384,000

Journal entry worksheet

Record the sale of inventory for $259,800.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
(a)

Journal entry worksheet

Record the allocation of the gain or loss on the sale of inventory to the partners.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
(b-1)

Journal entry worksheet

Assuming that the partners have no assets other than those invested, allocate any partner(s) deficit balances to the remaining partners.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
(b-2)

Journal entry worksheet

Record the payment of the liabilities.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
(c)

Journal entry worksheet

Record the disbursement of the remaining cash to the partner(s).

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
(d)