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$15,000 Liabilities$74,000
Accounts receivable82,000 Rodgers loan35,000
Inventory101,000 Wingler capital (30%)120,000
Land85,000 Norris capital(10%)88,000
Building and equipment (net)168,000 Rodgers capital (20%)74,000
Guthrie capital (40%)60,000
Total assets451,000 Total liabilities and capital451,000
When the liquidation commenced, expenses of $16,000 were anticipated as being necessary to dispose of all property.
Part A: develop a pre-distribution plan for this partnership.
The following transactions transpire during the liquidation of the Wingler, Norris, Rodgers, and Guthrie partnership:
1. Collected 80 percent of the total accounts receivable with the rest judged to be uncollectible.
2. Sold the land, building, and equipment for $150,000.
3. Made safe capital distributions.
4. Learned that Guthrie, who has become personally insolvent, will make no further contributions.
5. Paid all liabilities.
6. Sold all inventory for $71,000.
7. Made safe capital distributions again.
8. Paid liquidation expenses of $11,000.
9. Made final cash disbursements to the partners based on the assumption that all partners other than Guthrie are personally solvent.
Part B: Prepare journal entries to record these liquidation transactions.
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