Question
The partnership of Larson, Norris, Spencer, and Harrison has decided to terminate operations and liquidate all business property. During this process, the partners expect to
The partnership of Larson, Norris, Spencer, and Harrison has decided to terminate operations and liquidate all business property. During this process, the partners expect to incur $8,000 in liquidation expenses. All partners are currently solvent.
The balance sheet reported by this partnership at the time that the liquidation commenced follows. The percentages indicate the allocation of profits and losses to each of the four partners.
| Cash | $ | 28,250 | Liabilities | $ | 47,000 |
| Accounts receivable | 44,000 | Larson, capital (20%) | 15,000 | ||
| Inventory | 39,000 | Norris, capital (30%) | 60,000 | ||
| Land and buildings | 23,000 | Spencer, capital (20%) | 75,000 | ||
| Equipment | 104,000 | Harrison, capital (30%) | 41,250 | ||
| Total assets | $ | 238,250 | Total liabilities and capital | $ | 238,250 |
Based on the information provided, prepare a predistribution plan for liquidating this partnership.
| Partner | Capital Balance | Loss Allocation | Maximim Loss that can be Aborbed |
| Schedule 1 |
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| Larson |
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| Norris |
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| Spencer |
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| Harrison |
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| Schedule 2 |
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| Larson |
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| Norris |
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| Spencer |
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| Harrison |
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| Schedule 3 |
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| Larson |
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| Norris |
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| Spencer |
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| Harrison |
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| Larson | Norris | Spencer | Harrison |
| Beginning Balances |
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| Assumed Loss |
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| Schedule 1 |
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| Step one balances |
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| Assumed loss |
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| Schedule 2 |
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| Step two balances |
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| Assumed loss |
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| Schedule 3 |
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| Step 3 balances |
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Financial Accounting
Authors: Harrison, Horngren, Thomas
1st Edition
0558823513, 978-0558823511
