Exam 15: Partnerships: Termination and Liquidation

Why is a Schedule of Liquidation prepared?

On January 1, 2011, the partners of Won, Cadel, and Dax (who shared profits and losses in the ratio of 5:3:2, respectively) decided to liquidate their partnership. The trial balance at this date was as follows: The partners planned a program of piecemeal conversion of the business assets to minimize liquidation losses. All available cash, less an amount retained to provide for future expenses, was to be distributed to the partners at the end of each month. A summary of liquidation transactions follows: Prepare a schedule to calculate the safe payments to be made to the partners at the end of March.

Hardin, Sutton, and Williams have operated a local business as a partnership for several years. All profits and losses have been allocated in a 3:2:1 ratio, respectively. Recently, Williams has undergone personal financial problems, and is insolvent. To satisfy Williams' creditors, the partnership has decided to liquidate. The following balance sheet has been produced: During the liquidation process, the following transactions take place: - Noncash assets are sold for $116,000. - Liquidation expenses of $12,000 are paid. No further expenses are expected. - Safe capital distributions are made to the partners. - Payment is made of all business liabilities. - Any deficit capital balances are deemed to be uncollectible. Compute safe cash payments after the noncash assets have been sold and the liquidation expenses have been paid.

Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start of the process, capital balances were as follows: Which one of the following statements is true for a predistribution plan?

A local partnership was considering the possibility of liquidation since one of the partners (Ding) was personally insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively. Creditors of partner Ding filed a $25,000 claim against the partnership's assets. At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time. If the assets could be sold for $228,000, what is the minimum amount that Ezzard's creditors would have received?

For a partnership, how should liquidation gains and losses be accounted for?

The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances: Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. Before liquidating any assets, the partners determined the amount of cash for safe payments and distributed it. The noncash assets were then sold for $120,000. The liquidation expenses of $5,000 were paid. How much of the $120,000 would be distributed to the partners? (Hint: Either a predistribution plan or a schedule of safe payments would be appropriate for solving this item.)

The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet: Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000. After the liquidation expenses of $12,000 were paid and the noncash assets sold, Creighton had a deficit of $8,000. For what amount were the noncash assets sold?

The Albert, Boynton, and Creamer partnership was in the process of liquidating its assets and going out of business. Albert, Boynton, and Creamer had capital account balances of $80,000, $120,000, and $200,000, respectively, and shared profits and losses in the ratio of 1:3:2. Equipment that had cost $90,000 and had a book value of $60,000 was sold for $24,000 cash. Required: Prepare the appropriate journal entry to record the sale of the equipment, distributing any gain or loss directly to the partners.

The partners of Donald, Chief & Berry LLP decided to liquidate on August 1, 2011. The balance sheet of the partnership is as follows, with the profit and loss ratio of 25%, 45%, and 30%, respectively. The disposal of Other Assets with a carrying amount of $200,000 realized $140,000, and all available cash was distributed. Prepare the journal entry for Donald, Chief & Berry LLP on August 1, 2011, to record the realization of Other Assets.

What accounting transactions are not recorded by an accountant during partnership liquidation?

A local partnership has assets of cash of $130,000 and land recorded at $700,000. All liabilities have been paid and the partners are all personally insolvent. The partners' capital accounts are as follows Roberts, $500,000, Ferry, $300,000 and Mones, $30,000. The partners share profits and losses 5:3:2. If the land is sold for $450,000, how much cash will Mones receive in the final settlement?

Xygote, Yen, and Zen were partners who were liquidating their partnership. Each partner has a deficit balance in their respective capital account. All assets from the partnership have been liquidated and all of the liabilities had been paid. How should any additional cash coming into the partnership be distributed to the partners?

A local partnership was in the process of liquidating and reported the following capital balances: Douglass indicated that the $14,000 deficit would be covered by a forthcoming contribution. However, the two remaining partners asked to receive the $31,000 that was then in the cash account. How much of this money should Justice receive?

As of January 1, 2011, the partnership of Canton, Yulls, and Garr had the following account balances and percentages for the sharing of profits and losses: The partnership incurred losses in recent years and decided to liquidate. The liquidation expenses were expected to be $10,000. How much cash should each partner receive at this time, pursuant to a proposed schedule of liquidation?

The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation: Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for $60,000. How much will each partner receive in the liquidation?

The balance sheet of Rogers, Dennis & Berry LLP prior to liquidation included the following: The three partners shared net income and losses in a 5:3:2 ratio, respectively. Noncash assets were sold for $60,000. Creditors were paid in full, partners were paid $35,000, and the balance of cash was retained pending future developments. Record the journal entry for the cash distribution to the partners.

On January 1, 2011, the partners of Won, Cadel, and Dax (who shared profits and losses in the ratio of 5:3:2, respectively) decided to liquidate their partnership. The trial balance at this date was as follows: The partners planned a program of piecemeal conversion of the business assets to minimize liquidation losses. All available cash, less an amount retained to provide for future expenses, was to be distributed to the partners at the end of each month. A summary of liquidation transactions follows: Prepare a schedule to calculate the safe installment payments to be made to the partners at the end of February.

Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start of the process, capital balances were as follows: Which one of the following statements is true for a predistribution plan?

The balance sheet of Rogers, Dennis & Berry LLP prior to liquidation included the following: The three partners shared net income and losses in a 5:3:2 ratio, respectively. Noncash assets were sold for $60,000. Creditors were paid in full, partners were paid $35,000, and the balance of cash was retained pending future developments. Determine the cash to be retained and prepare a schedule to distribute $35,000 cash to the partners.