PROBLEM #2 ( 10 Marks )

The partners of the MKR Partnership agree to liquidate their partnership on December 31, 2020. At that point, the accounting records show the following balances:

Account Debit Credit

Cash $29,000

Notes Payable $15,000

Accounts Receivable 21,000

Accounts Payable 30,000

Allowance for Doubtful Accounts 2,000

Wages Payable 4,000

Merchandise Inventory 36,000

M. Samuels, Capital 25,000

Equipment 18,000

K. Roswell, Capital 20,000

Accumulated Depreciation-Equipment 7,000

R. Simpson, Capital 1,000

Total $104,000 $104,000

The partners share profits and losses in a 6:3:1 ratio for Samuels, Roswell, and Simpson, respectively. During the process of liquidation, the following transactions

were completed in the below sequence:

1. A total of $50,000 cash was received from selling the non-cash assets.

2. Allocate any gain or loss from the sale to the partners.

3. All liabilities were paid in full.

4. Simpson paid his capital deficiency.

5. The remaining cash was paid to the partners.

Instructions:

Prepare the journal entries to record the above transactions related to the liquidation of the partnership.

Accounts Debit Credit Date