Concept explainers
Concept introduction
A procedure of paying off all the liabilities of the partnership firm, selling out all the respective assets of the partnership firm and then distribution of the remaining assets and the cash when the partnership business is going out of the business is known as partnership liquidation.
To prepare: The amount of the available cash distributed to partner B when the receivables and the inventory were liquidated for
Answer to Problem 6E
The amount of available cash available for the distribution to the partner B is
Explanation of Solution
Details | cash | Noncash assets | Liabilities | Loan from A | A | B | C |
Starting balance | |||||||
Liquidation of receivables and inventory | |||||||
Liabilities due | |||||||
Remaining noncash assets loss | |||||||
balance |
Concept introduction
Partnership liquidation
A procedure of paying off all the liabilities of the partnership firm, selling out all the respective assets of the partnership firm and then the distribution of the remaining assets and the cash when the partnership business is going out of the business is known as partnership liquidation.
To prepare: The amount of the available cash distributed to partner B when all the non-cash assets other than equipment were sold for
Answer to Problem 6E
There is no amount of available cash available for the distribution to the partner B.
Explanation of Solution
Details | Cash | Noncash asset | Liabilities | Loan from A | A | B | C |
Initial balance | |||||||
Sale of non-cash assets | |||||||
Payment of liabilities | |||||||
Amount | |||||||
Retain cash of | |||||||
balances |
Concept introduction
Partnership liquidation
A procedure of paying off all the liabilities of the partnership firm, selling out all the respective assets of the partnership firm and then the distribution of the remaining assets and the cash when the partnership business is going out of the business is known as partnership liquidation.
To prepare: The amount of the available cash distributed to partner B when non-cash assets with a book value
Answer to Problem 6E
The amount of available cash that would be distributed to partner B is
Explanation of Solution
details | Cash | Noncash assets | Liabilities | Loan from A | A | B | C |
Initial balance | |||||||
Sale of noncash asset | |||||||
Payment of liability | |||||||
Payment of loan from A | |||||||
The maximum loan on remaining noncash asset | |||||||
Retain cash of | |||||||
Balance | |||||||
Absorption of A’s deficit balance | |||||||
Net balance |
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Chapter 14 Solutions
Advanced Accounting
- The following condensed balance sheet is for the partnership of Miller, Tyson, and Watson, who share profits and losses in the ratio of 6:2:2, respectively: Cash Other assets Total assets $ 49,000 135,000 $ 184,000 a. Assuming no liquidation expenses, calculate the safe payments that can be made to partners at this point in time. b. For how much money must the other assets be sold so that each partner receives some amount of cash in a liquidation? Complete this question by entering your answers in the tabs below. Required A Required B Safe payments Liabilities Miller, capital Tyson, capital Watson, capital Total liabilities and capital Assuming no liquidation expenses, calculate the safe payments that can be made to partners at this point in time. Tyson Miller $ 39,000 63,000 63,000 19,000 $ 184,000 Watsonarrow_forwardAfter all noncash assets have been converted to cash in the liquidation of MM Partnership, the ledger contains the following account balances: Debit balances: Cash: P 34, 000; Mae, Capital: P 8, 000; Credit balances: A/P: P 25, 000; Mae, Loan: P 9, 000; Mila, Capital: P 8, 000. After paying the A/P of P25, 000, available cash should be distributed toarrow_forwardIn partnership liquidation the first cash distribution should be made for Select one: a. loan to bank b. partner capital c. loan to partner d. Liquidation expenses 000arrow_forward
- In the liquidation of a partnership, it is necessary to (1) distribute cash to the partners, (2) sell noncash assets, (3) allocate any gain or loss on realization to the partners and (4) pay liabilities. These steps should be performed in the following order Select one: a. (2), (3), (1), (4). b. (2), (3), (4), (1). c. (3), (2), (1), (4). d. (3), (2), (4), (1).arrow_forwardThe balance sheet for the Delphine, Xavier, and Olivier partnership follows: Delphine, Xavier, and Olivier share profits and losses in the ratio of 4:4:2, respectively. The partners have agreed to terminate the business and estimate that $12,000 in liquidation expenses will be incurred. What is the amount of cash that safely can be paid to partners prior to liquidation of noncash assets? How should the safe amount of cash determined in (a) be distributed to the partners?arrow_forwardThe Drysdale, Koufax, and Marichal partnership has the following balance sheet immediately prior to liquidation: Cash Noncash assets Req A1 a-1. Determine the maximum loss that can be absorbed in Step 1. Then, assuming that this loss has been incurred, determine the next maximum loss that can be absorbed in Step 2. a-2. Liquidation expenses are estimated to be $19,000. Prepare a predistribution schedule to guide the distribution of cash. Further, modify the tags in explanation as well. b. Assume that assets costing $78,000 are sold for $62,000. How is the available cash to be divided? Complete this question by entering your answers in the tabs below. Step 1 $ 40,000 224,000 Partner Capital Balance Drysdale Koufax Marichal Determine the maximum loss that can be absorbed in Step 1. Then, assuming that this loss has been incurred, determine the next maximum loss that can be absorbed in Step 2. Step 2 Liabilities Drysdale, loan Drysdale, capital (50%) Koufax, capital (30%) Marichal,…arrow_forward
- Statement I: In lumpsum liquidation, the remaining cash available after realization and payment of liquidation expenses, will be equal to the total interest of the partners.Statement II: In installment liquidation, the partner who has the highest absorption capacity shall be prioritized in the payment of interest. Group of answer choices Both statements are false Both statements are true S1 is true; S2 is false S1 is false; S2 is truearrow_forwardAfter liquidating noncash assets and paying creditors, account balances in the Sandhill Co. are Cash $17,200; A, Capital (Cr.) $7,700; B, Capital (Cr.) $5,500; and C, Capital (Cr.) $4,000. The partners share income equally. Journalize the final distribution of cash to the partners. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Creditarrow_forwardCC admits DD as a partner in business. Accounts in the ledger for CC on November 30, 20x4, just before the admission of DD, show the following balances: Cash.... P 6,800 Accounts Receivable... 14,200 Merchandise Inventory... 20,000 Accounts Payable.. . 8,000 CC, Capital... 33,000 It is agreed that for the purposes of establishing CC's interest the following adjustments shall be made: 1. An allowance for doubtful accounts of 3% of account receivable is to be established. 2. The merchandise inventory is to be valued at P23,000. 3. Prepaid salary expenses of P600 and accrued rent expense of P800 are to be recognized. 1 DD ic to invest sufficient cash to obtain a 1/3 interest in thearrow_forward
- In the liquidation of a partnership it is important to (1) distribute cash to the partners, (2) sell noncash assets, (3) allocate any gain or loss on realization to the partners, and (4) pay liabilities. These steps should be performed in the following order: (3), (2), (4), (1) (3), (2), (1), (4) (2), (3), (1), (4) (2), (3), (4), (1)arrow_forwardFollowing is a series of independent cases. In each situation, indicate the cash distribution to be made to partners at the end of the liquidation process. Unless otherwise stated, assume that all solvent partners will reimburse the partnership for their deficit capital balances.Part AThe Buarque, Monte, and Vinicius partnership reports the following accounts. Vinicius is personally insolvent and can contribute only an additional $9,000 to the partnership. Cash . . . . . . . . . . . . . . . . .. . $ 130,000Liabilities . . . . . . . . . . . . . .. . . 35,000Monte, loan . . . . . . . . . . . . . . . 20,000Buarque, capital (50% of profits and losses) . . . . . . . . . . . . . . 50,000Monte, capital (25%) . . . . . 40,000Vinicius, capital (25%) . . . . . . . . . . . . . . . . . . . . . . . . . (15,000) (deficit) Part BDrawdy, Langston, and Pearl operate a local accounting firm as a partnership. After working together for several years, they have decided to liquidate the partnership’s…arrow_forwardUnder the following four independent assumptions, prepare the journal entries for the sale of the land and buildings, allocation of any loss or gain,any deficits, the payment of the liability, and the distributions to the partners if: A) the land and buildings were sold for 130,000, and the partners with deficits have no assets other than those invested in the businessarrow_forward
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