The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate its business
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Question:
The partnership of Frick, Wilson, and Clarke 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 | $ | 48,000 | Liabilities | $ | 35,000 | |
Noncash assets | 177,000 | Frick, capital (60%) | 101,000 | |||
Wilson, capital (20%) | 28,000 | |||||
Clarke, capital (20%) | 61,000 | |||||
Total assets | $ | 225,000 | Total liabilities and capital | $ | 225,000 | |
Part A
Prepare a predistribution plan for this partnership.
Part B
The following transactions occur in liquidating this business:
- Distributed safe payments of cash immediately to the partners. Liquidation expenses of $9,000 are estimated as a basis for this computation.
- Sold noncash assets with a book value of $80,000 for $48,000.
- Paid all liabilities.
- Distributed safe payments of cash again.
- Sold remaining noncash assets for $44,000.
- Paid actual liquidation expenses of $7,000 only.
- Distributed remaining cash to the partners and closed the financial records of the business permanently.
Produce a final statement of liquidation for this partnership using the predistribution plan to determine payments of cash to partners.
Part C
Prepare journal entries to record the liquidation transactions reflected in the final statement of liquidation.
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