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
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 | $ | 67,000 | Liabilities | $ | 41,000 | |
Noncash assets | 267,000 | Frick, capital (60%) | 159,000 | |||
Wilson, capital (20%) | 43,000 | |||||
Clarke, capital (20%) | 91,000 | |||||
Total assets | $ | 334,000 | Total liabilities and capital | $ | 334,000 | |
Part A
Prepare a predistribution plan for this partnership
Part B
The following transactions occur in liquidating this business:
Distributed cash based on safe capital balances 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 $110,000 for $67,000.
Paid all liabilities.
Distributed cash based on safe capital balances again.
Sold remaining noncash assets for $59,000.
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 based on safe capital balances.
Part C
Prepare journal entries to record the liquidation transactions reflected in the final statement of liquidation.
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