Question
Problem 3 - Partnership Liquidation No Capital Deficiency (25 Points) The partners in Tallis Company decide to liquidate the firm when the balance sheet shows
Problem 3 - Partnership Liquidation No Capital Deficiency (25 Points)
The partners in Tallis Company decide to liquidate the firm when the balance sheet shows the
following.
Tallis Company
Balance Sheet
December 31, 2019
AssetsLiabilities and Owner's Equity
Cash$30,000Notes payable$20,000
Accounts receivable 25,000Accounts payable30,000
Inventory 35,000Salaries and wages payable2,500
Equipment 20,000James, capital28,000
Accumulated depreciation(10,000)Alaya, capital13,650
Jones, capital5,850
Total$100,000$100,000
The partners share income and loss is 50% for James, 30% Alaya, and 20% Jones.During the process of liquidation, the transactions below were completed in the following sequence.
1. The partnership will sell its noncash assets to Jackson Enterprises for $80,000 cash.
2. Gain or loss on realization was allocated to partners.
3. Liabilities were paid in full.
4. Cash was paid to the partners with credit balances.
Instructions
a. schedule of cash payments.
b. the entry to record the sale of the noncash assets.
c. Prepare the entry to record the allocation of the gain or loss on liquidation to the partners.
d. Prepare the entry to record the payment in full to the creditors.
e. Record the distribution of cash to the partners.
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