The three partners of Hawkdale Contractors agree to liquidate their partnership on August 8, 2024. At that

Question:

The three partners of Hawkdale Contractors agree to liquidate their partnership on August 8, 2024. At that point, the accounting records show the following balances:

Cash .......................................................$142,600 

H. Brumby, capital ...............................$227,900 

Merchandise inventory .........................402,900 

R. Criolio, capital ....................................179,900 

Notes payable ........................................113,000 

A. Paso, capital .........................................24,700  

The three partners share profit and loss equally. 


Instructions 

a. Journalize the liquidation of the partnership on August 8 under each of the following independent assumptions: 

1. The merchandise inventory is sold for $434,000 cash, the note payable is paid, and the remaining cash is paid to the partners. 

2. The merchandise inventory is sold for $318,000 cash and the note payable is paid. Assume that any partners with a debit capital balance pay the amount owed to the partnership. 

b. Refer to item 2 in part (a) above. Assume instead that any partners with a debit capital balance are unable to pay the amount owed to the partnership. Journalize the reallocation of the deficiency and final distribution of cash to the remaining partners.


What can partners do when a partnership is first created to reduce the possibility that one of the partners will have a deficit (debit balance) when the partnership is liquidated? 

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Related Book For  book-img-for-question

Accounting Principles Volume 2

ISBN: 9781119786634

9th Canadian Edition

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

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