After 25 years of operations, the Starke, Lannister, and Targaryen partnership has decided to liquidate. At that
Question:
After 25 years of operations, the Starke, Lannister, and Targaryen partnership has decided to liquidate.
At that time, 1/1/20x2, the partnership balance is as follows:
Starke, Lannister, and Targaryen, Partners Balance Sheet As of 1/1/20x2 | |||
Assets | Liabilities and Partners’ Capital | ||
Cash | $90,000 | Liabilities | $60,000 |
Noncash assets | 300,000 | Starke, Capital | 80,000 |
Total assets | $390,000 | Lannister, Capital | 110,000 |
Targaryen, Capital | 140,000 | ||
$390,000 |
In accordance with the Articles of Partnership, the partners agreed to share profits and losses as follows:
Starke, Capital | 30% |
Lannister, Capital | 40% |
Targaryen, Capital | 30% |
The partnership estimates liquidation expenses of $8,000.
Required
- The partnership disposes of $150,000 of the noncash assets for $120,000, give the journal entry recording disposal of those noncash assets.
- Prepare a Statement of Liquidation for the partnership, given the following:
- Disposes of remaining non-cash assets for $110,000
- Settles all outstanding liabilities
- Settles partnership expenses.
- Briefly explain the:
- Purpose of a “predistribution” plan,
- Term “safe” balance (also called “safe payment”), and
- Assumptions an accountant must consider when determining a partnership’s safe balance.
- For the Starke, Lannister, & Targaryen partnership, compute the total amount of cash available for safe payment before disposal of any non-cash assets. (No allocation to the individual partners is required)
Advanced Accounting
ISBN: 978-1305084858
12th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng