The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate its business
Question:
The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate its business property. A balance sheet drawn up at this time shows the following account balances:
Cash $71,000 | Liabilities $ 39,000 |
Noncash Assets 291,000 | Frick, capital (60%) 177,000 |
Wilson, capital (20%) 47,000 | |
Clarke, capital (20%) 99,000 | |
Total assets $362,000 | Total liabilities and capital $362,000 |
A. Prepare a predistribution plan for this partnership
Frick, Capital | Wilson, Capital | Clarke, Capital | |
Beg. Balances | |||
Loss | |||
Step one balances | |||
Loss | |||
Step two balances | |||
Loss | |||
Step three balances |
B. The following transactions occur in liquidating this business:
1. Distributed cash based on safe capital balances immediately to the partners. Liquidation expenses of $9,000 are estimated as a basis for this computation.
2. Sold noncash assets with a book value of $118,000 for $71,000.
3. Paid all liabilities.
4. Distributed cash based on safe capital balances again.
5. Sold remaining noncash assets for $63,000.
6. Paid actual liquidation expenses of %7,000 only.
7. Distributed remaining cash to the partners and closed the financial record of the business permanently.
Produce a final statement of liquidation for this partnership using the pre-distribution plan to determine payments of cash to partners based on safe capital balances.
Fundamentals of Advanced Accounting
ISBN: 978-0077862237
6th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik