Exam 15: Partnerships: Termination and Liquidation

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

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.

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: Debit Credit Cash \ 23,400 Accounts Receivable 85,800 Inventory 67,600 Machinery and equipment, net 245,700 Won, loan Accounts payable \ 68,900 Cadel, loan 26,000 Won, capital 153,400 Cadel, capital 117,000 Dax capital 96,200 Totals \ 461,500 \ 461,500 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: January \ 66,300 was collected on the accounts receivable; the balance was deemed to be uncollectible. \ 49,400 was received for the entire inventory. \ 2,600 in liquidation expenses were paid. \ 65,000 was paid to outside creditors, after receiving a \ 3,900 credit memo from a creditor on January 11 Cash of \ 13,000 was retained at the end of the month to cover unrecorded liabilities and anticipated expenses. The balance of cash was distributed to the partners. February \ 3,900 in liquidation expenses were paid. \ 7,800 in cash was retained at the end of the month to cover unrecorded liabilities and anticipated expenses. March \ 189,800 was received on the sale of all machinery and equipment. \ 6,500 in final liquidation expenses were paid. No cash was retained as all cash was distributed to partners. -Prepare a schedule to calculate the safe installment payments to be made to the partners at the end of February.

Hardin, Sutton, and Williams has 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.

If the noncash assets are sold for $105,000, what would be the maximum amount of cash that Canton could expect to receive?

Which of the following statements is false concerning the partnership Schedule of Liquidation?

The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation: Cash \ 10,000 Liabilities \ 130,000 Noncash assets 300,000 Keaton, capital 60,000 Lewis, capital 40,000 Meador, capital 80,000 Total \ 310,000 Total \ 310,000 Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for $180,000. Liquidation expenses were $10,000. Assume that Lewis was personally insolvent and could not contribute any assets to the partnership, while Keaton and Meador were both solvent. What amount of cash would Keaton have received from the distribution of partnership assets?

Which one of the following statements is correct?

What should occur when a solvent partner has a deficit balance?

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: Answer: Cash \ 80,000 Noncash assets 205,000 Liabilities 47,000 Canton, capital (30\%) 138,000 Yulls, capital (40\%) 119,500 Garr, capital (30\%) (19,500) 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?