PROBLEM 15-1 Simple Liquidation LO 3

The Discount Partnership is being liquidated. The current balance sheet is shown here.

Discount PartnershipBalance SheetJanuary 14, 2024

Assets

Cash $25,000

Other assets 120,000

Total assets $145,000

Liabilities and Partners' Equity

Accounts payable $40,000

Dawson, capital 31,000

Feeney, capital 65,000

Hardin, capital 9,000

Total liabilities and partners' equity $145,000

Dawson, Feeney, and Hardin share profits and losses in a 30:40:30 ratio.

Required:

Provide a schedule of partnership liquidation for each of the following three independent cases.

The noncash assets are sold for $60,000, and any partner with a deficit is unable to eliminate any of the deficit. The noncash assets are sold for $60,000, and any partner with a deficit is able to invest cash equal to the amount of the deficit. The noncash assets are sold for $50,000, and any partner with a deficit is able to invest up to $8,000 cash in the partnership.

Provide all necessary journal entries for case 2 above.

PROBLEM 15-2 Installment Liquidation LO 4

Nelson, Parker, and Rice are partners who share profits 4:3:3, respectively. Parker decides that it would be more profitable for him to operate as a sole proprietor. Nelson and Rice are in agreement that life would be more rewarding if Parker were to enter into direct competition with them. Nelson and Rice make repeated attempts to acquire Parker's interest in the partnership. Unable to reach an agreement, the partners mutually agree that their association should be dissolved. A condensed balance sheet before realization of assets shows the following balances:

Assets Liabilities and Capital

Cash $5,000 Liabilities $20,000

Other Assets 60,000 Nelson, Capital 20,000

Parker, Capital 12,000

Rice, Capital 13,000

Total $65,000 Total $65,000

Asset realization is accomplished in four stages as follows:

Stage Sales Price Book Value

1 $16,000 $12,000

2 12,000 10,000

3 10,000 20,000

4 2,000 18,000

The partners prefer that cash be distributed as soon as it is available.

Required: Provide a summary in columnar form of the partnership realization and liquidation. You should prepare supporting schedules of safe payments before each cash distribution.

PROBLEM 15-4 Simple Liquidation with Personal Asset Information LO 3

Mary, Paula, and Ray have operated a retail store for 20 years. The partners share profits and losses in the ratio of 4:3:3, respectively. The partnership is unable to meet its obligations and the partners decide to liquidate the partnership. The firm's balance sheet just before the partners sell the other assets for $20,000 is as follows.

Assets Liabilities and Partners' Equities

Cash $10,000 Liabilities $40,000

Other Assets 100,000 Mary, Capital 50,000

Paula, Capital 10,000

Ray, Capital 10,000

$110,000

$110,000

After the sale of the noncash assets, the personal assets and liabilities of each partner are determined to be the following:

Personal Assets Personal Liabilities

Mary $50,000 $80,000

Paula 30,000 10,000

Ray 30,000 50,000

The partnership operates in a state that has adopted the Uniform Partnership Act.

Required:

Determine the amount of cash each partner will receive in liquidation and how much cash each partner must contribute to the firm, given their personal positions. Determine the amounts that the personal creditors will receive from personal assets and any distribution from the partnership.