Question

The events that follow pertain to a partnership formed by Mercian Zadoney and Michael Slater to operate a floor-cleaning company.
2013
Feb. 14 The partnership was formed. Zadoney transferred to the partnership $160,000 cash, land worth $160,000, a building worth $960,000, and a mortgage on the building of $480,000. Slater transferred to the partnership $80,000 cash and equipment worth $320,000.
Dec. 31 During 2013, the partnership earned income of just $168,000. The partnership agreement specifies that income and losses are to be divided by paying salaries of $80,000 to Zadoney and $120,000 to Slater, allowing 8  percent interest on beginning capital investments, and dividing any remainder equally.
2014
Jan. 1 To improve the prospects for the company, the partners decided to take in a new partner, George Nissan, who had experience in the floor-cleaning business. Nissan invested $312,000 for a 25 percent interest in the business. A bonus was transferred in equal amounts from the original partners’ Capital accounts to Nissan’s Capital account.
Dec. 31 During 2014, the company earned income of $174,400. The new partnership agreement specified that income and losses would be divided by paying salaries of $120,000 to Slater and $160,000 to Nissan (no salary to Zadoney), allowing 8 percent interest on beginning capital balances after Nissan’s admission, and dividing the remainder equally.
2015
Jan. 1 Because it appeared that the business could not support the three partners, the partners decided to liquidate the partnership. The asset and liability accounts of the partnership were as follows: Cash, $814,400; Accounts Receivable (net), $136,000; Land, $160,000; Building (net), $896,000; Equipment (net), $472,000; Accounts Payable, $176,000; and Mortgage Payable, $448,000. The equipment was sold for $400,000. The accounts payable were paid. The loss was distributed equally to the partners’ Capital accounts. A statement of liquidation was prepared, and the remaining assets and liabilities were distributed. Zadoney agreed to accept cash plus the land and building at book value and the mortgage payable as payment for his share. Slater accepted cash and the accounts receivable for his share. Nissan was paid in cash.

Required
Prepare journal entries to record all of the facts above. Support your computations with schedules, and prepare a statement of liquidation in connection with the January 1, 2015, entries.



$1.99
Sales4
Views305
Comments0
  • CreatedMarch 26, 2014
  • Files Included
Post your question
5000