Question
The partnership of Wingler, Norris, Rodgers, and Guthrie was formed several years ago as a local architectural firm. Several partners have recently undergone personal financial
The partnership of Wingler, Norris, Rodgers, and Guthrie was formed several years ago as a local architectural firm. Several partners have recently undergone personal financial problems and have decided to terminate operations and liquidate the business. The following balance sheet is drawn up as a guideline for this process:
Cash | $ | 51,000 | Liabilities | $ | 61,000 |
Accounts receivable | 118,000 | Rodgers, loan | 71,000 | ||
Inventory | 137,000 | Wingler, capital (30%) | 174,000 | ||
Land | 103,000 | Norris, capital (10%) | 124,000 | ||
Building and equipment (net) | 186,000 | Rodgers, capital (20%) | 92,000 | ||
Guthrie, capital (40%) | 73,000 | ||||
Total assets | $ | 595,000 | Total liabilities and capital | $ | 595,000 |
When the liquidation commenced, liquidation expenses of $14,000 were anticipated as being necessary to dispose of all property.
Part A
Prepare a predistribution plan for this partnership.
Part B
The following transactions transpire during the liquidation of the Wingler, Norris, Rodgers, and Guthrie partnership:
- Collected 80 percent of the total accounts receivable with the rest judged to be uncollectible.
- Sold the land, building, and equipment for $168,000.
- Distributed safe payments of cash.
- Learned that Guthrie, who has become personally insolvent, will make no further contributions.
- Paid all liabilities.
- Sold all inventory for $93,000.
- Distributed safe payments of cash again.
- Paid actual liquidation expenses of $8,000 only.
- Made final cash disbursements to the partners based on the assumption that all partners other than Guthrie are personally solvent.
Prepare journal entries to record these liquidation transactions.
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