The partnership of Bauer, Ohtani, and Souza has elected to cease all operations and liquidate its business
Question:
The partnership of Bauer, Ohtani, and Souza has elected to cease all operations and liquidate its business property. A balance sheet drawn up at this time shows the following account balances:
Cash | $ 63,000 | Liabilities | $ 37,000 |
Noncash assets | 255,000 | Bauer, capital (60%) | 153,000 |
Ohtani, capital (20%) | 41,000 | ||
Souza, capital (20%) | 87,000 | ||
Total assets | $ 318,000 | Total liabilities and capital | $ 318,000 |
Required:
Part B
The following transactions occur in liquidating this business:
- Distributed safe payments of cash immediately to the partners. Liquidation expenses of $7,000 are estimated as a basis for this computation.
- Sold noncash assets with a book value of $106,000 for $63,000.
- Paid all liabilities.
- Distributed safe payments of cash again.
- Sold remaining noncash assets for $57,000.
- Paid actual liquidation expenses of $5,000 only.
- Distributed remaining cash to the partners and closed the financial records of the business permanently.
BAUER, OHTANI, AND SOUZA | ||||||
Statement of Partnership Liquidation | ||||||
Final Balances | ||||||
Cash | Noncash Assets | Liabilities | Bauer, Capital (60%) | Ohtani, Capital (20%) | Souza, Capital (20%) | |
Beginning balances | $63,000 | $255,000 | $37,000 | $153,000 | $41,000 | $87,000 |
Distribution | (19,000)selected answer correct | 0selected answer correct | 0selected answer correct | 0selected answer correct | 0selected answer correct | (19,000)selected answer correct |
Updated balances | $44,000not attempted | $255,000 | $37,000 | $153,000 | $41,000 | $68,000 |
Noncash assets sold | 63,000selected answer correct | (106,000)selected answer correct | 0selected answer correct | (25,800)selected answer correct | (8,600)selected answer correct | (8,600)selected answer correct |
Updated balances | $107,000 | $149,000 | $37,000 | $127,200 | $32,400 | $59,400 |
Liabilities paid | (37,000)selected answer correct | 0selected answer correct | (37,000)selected answer correct | 0selected answer correct | 0selected answer correct | 0selected answer correct |
Updated balances | $70,000 | $149,000 | $0 | $127,200 | $32,400 | $59,400 |
First (remainder of first distribution) | 0selected answer incorrect | 0selected answer correct | 0selected answer correct | not attempted | not attempted | not attempted |
Next | 0selected answer incorrect | 0selected answer correct | 0selected answer correct | not attempted | not attempted | not attempted |
Next | 0selected answer incorrect | 0selected answer correct | 0selected answer correct | not attempted | not attempted | not attempted |
Updated balances | $70,000 | $149,000 | $0 | $127,200 | $32,400 | $59,400 |
Noncash assets sold | 57,000selected answer correct | (149,000)selected answer correct | 0selected answer correct | (55,200)selected answer correct | (18,400)selected answer correct | (18,400)selected answer correct |
Updated balances | $127,000 | $0 | $0 | $72,000 | $14,000 | $41,000 |
Liquidation expenses paid | (5,000)selected answer correct | 0selected answer correct | 0selected answer correct | (3,000)selected answer correct | (1,000)selected answer correct | (1,000)selected answer correct |
Updated balances | $122,000 | $0 | $0 | $69,000 | $13,000 | $40,000 |
Final distribution based on ending capital account balances | 0selected answer incorrect | 0selected answer correct | 0selected answer correct | 0selected answer incorrect | 0selected answer incorrect | 0selected answer incorrect |
Ending balance | $122,000 | $0 | $0 | $69,000 | $13,000 | $40,000 |
final statement of liquidation for this partnership using the predistribution plan to determine payments of cash to partners.
Part C
journal entries to record the liquidation transactions reflected in the final statement of liquidation.
A
Record the entry for initial cash payments made to partners in accordance with predistribution plan.
B
Record the sale of noncash assets with a book value of $106,000 for $63,000.
C
Record the extinguishment of all partnership liabilities.
D
Record the entry for cash payments made to partners in accordance with predistribution plan.
E
Record the sale of the remaining noncash assets for $57,000.
F
Record the payment of liquidation expenses.
G
Record the entry for final cash payments made to partners based on ending capital balances.