Leverage Partnership’s balance sheet as of July 31, 2014, follows.

The partners—Gauri, Tailor, and Pavel—share income and losses in the ratio of 5:3:2. Because of a mutual disagreement, Gauri, Tailor, and Pavel have decided to liquidate the business.

Assume that Gauri cannot contribute any additional personal assets to the company during liquidation and that the following transactions occurred during liquidation: (a) Accounts receivable were sold for 60 percent of their book value. (b) Inventory was sold for $552,000. (c) Equipment was sold for $600,000. (d) Accounts payable were paid in full. (e) Gain or loss from realization was distributed to the partners’ Capital accounts. (f) Gauri’s deficit was transferred to the remaining partners in their new income and loss ratio. (g) The remaining cash was distributed to Tailor and Pavel.

Required

1. Prepare a statement of liquidation.

2. Prepare journal entries to liquidate the partnership and distribute any remaining cash.
 

Transcribed Image Text:

Leverage Partnership Balance Sheet July 31, 2014 Assets Liabilities Cash $ 12,000 Accounts payable $ 960,000 Accounts receivable 240,000 528,000 Inventory Partners' Equity Equipment (net) 924,000 Gauri, capital $ 144,000 Tailor, capital 360,000 Pavel, capital Total partners'equity Total liabilities and partners' equity 240,000 $ 744,000 Total assets $1,704,000 $1,704,000 Leverage Partnership Balance Sheet July 31, 2014 Assets Liabilities Cash $ 12,000 Accounts payable $ 960,000 Accounts receivable 240,000 528,000 Inventory Partners' Equity Equipment (net) 924,000 Gauri, capital $ 144,000 Tailor, capital 360,000 Pavel, capital Total partners'equity Total liabilities and partners' equity 240,000 $ 744,000 Total assets $1,704,000 $1,704,000

Answer rating: 100% (QA)

Step 1 of 8 A 1 In the statement of liquidation sale of assets and payment of liabilities is deducte... View the full answer