Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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 | $ | 71,000 | Liabilities | $ | 39,000 | |
Noncash assets | 291,000 | Frick, capital (60%) | 177,000 | |||
Wilson, capital (20%) | 47,000 | |||||
Clarke, capital (20%) | 99,000 | |||||
Total assets | $ | 362,000 | Total liabilities and capital | $ | 362,000 | |
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 $118,000 for $71,000.
- Paid all liabilities.
- Distributed cash based on safe capital balances again.
- Sold remaining noncash assets for $63,000.
- 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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started