Problem 3 - Partnership Liquidation No Capital Deficiency (25 Points)

The partners in Tallis Company decide to liquidate the firm when the balance sheet shows the

following.

Tallis Company

Balance Sheet

December 31, 2019

AssetsLiabilities and Owner's Equity

Cash$30,000Notes payable$20,000

Accounts receivable 25,000Accounts payable30,000

Inventory 35,000Salaries and wages payable2,500

Equipment 20,000James, capital28,000

Accumulated depreciation(10,000)Alaya, capital13,650

Jones, capital5,850

Total$100,000$100,000

The partners share income and loss is 50% for James, 30% Alaya, and 20% Jones.During the process of liquidation, the transactions below were completed in the following sequence.

1. The partnership will sell its noncash assets to Jackson Enterprises for $80,000 cash.

2. Gain or loss on realization was allocated to partners.

3. Liabilities were paid in full.

4. Cash was paid to the partners with credit balances.

Instructions

a. schedule of cash payments.

b. the entry to record the sale of the noncash assets.

c. Prepare the entry to record the allocation of the gain or loss on liquidation to the partners.

d. Prepare the entry to record the payment in full to the creditors.

e. Record the distribution of cash to the partners.