The partnership of Smith, Graves and Wadlington 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	160,000		Wadlington, Loan	10,000
			Smith, Capital (50%)	92,500
			Graves, Capital (25%)	23,750
			Wadlington, Capital (25%)	46,750
Total Assets	$208,000		Total Liabilities & Capital	$208,000

The following transactions occur in liquidating this business:

• Distributed safe balances immediately to the partner(s). Liquidation expenses of $8,000 are estimated as a basis for this computation.

• Sold $80,000 of the noncash assets for $50,000.

• Paid all liabilities.

• Distributed safe balances again.

• Sold remaining noncash transactions for $45,000.

• Paid liquidation expenses of $6,000.

• Distributed remaining cash to the partners and closed the financial records of the business permanently.

Required:

A. Prepare a pre-distribution plan for this partnership.

B. Prepare the journal entries to record the liquidation transactions.

C. Produce a final schedule of liquidation for the partnership based on the transactions recorded.

D. What should occur when a solvent partner has a deficit balance?