70.2K

Verified Solution

Link Copied!

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	$	60,000		Liabilities	$	43,000
Noncash assets		207,000		Frick, capital (60%)		120,000
				Wilson, capital (20%)		33,000
				Clarke, capital (20%)		71,000
Total assets	$	267,000		Total liabilities and capital	$	267,000

Part A

Prepare a predistribution plan for this partnership.

Part B

1.The following transactions occur in liquidating this business:

2. Distributed safe payments of cash immediately to the partners. Liquidation expenses of $10,000 are estimated as a basis for this computation.

3. Sold noncash assets with a book value of $90,000 for $60,000.

4. Paid all liabilities.

5. Distributed safe payments of cash again.

6. Sold remaining noncash assets for $49,000.

7. Paid actual liquidation expenses of $8,000 only.

Distributed remaining cash to the partners and closed the financial records of the business permanently.

Part C

Prepare journal entries to record the liquidation transactions reflected in the final statement of liquidation.

Prepare a predistribution plan for this partnership.

A.

	Frick, Capital Wilson, Capital Clarke, Capital Beginning balances $120,000 $33,000 $71,000 Assumed loss of Schedule 1 Step one balances 120,000 33,000 71,000 Assumed loss of Schedule 2 Step two balances 120,000 33,000 71,000 Assumed loss of Schedule 3 Step three balances 120,000 33,000 71,000

B.

FRICK, WILSON, AND CLARKE Statement of Partnership Liquidation Final Balances Cash Noncash Assets Liabilities Frick, Capital (60%) Wilson, Capital (20%) Clarke, Capital (20%) Beginning balances $60,000 $207,000 $43,000 $120,000 $33,000 $71,000 Distribution Updated balances $60,000 $207,000 $43,000 $120,000 $33,000 $71,000 Noncash assets sold Updated balances $60,000 $207,000 $43,000 $120,000 $33,000 $71,000 Liabilities paid Updated balances $60,000 $207,000 $43,000 $120,000 $33,000 $71,000 First (remainder of first distribution) Next Next Updated balances $60,000 $207,000 $43,000 $120,000 $33,000 $71,000 Noncash assets sold Updated balances $60,000 $207,000 $43,000 $120,000 $33,000 $71,000 Liquidation expenses paid Updated balances $60,000 $207,000 $43,000 $120,000 $33,000 $71,000 Final distribution based on ending capital account balances Ending balance $60,000 $207,000 $43,000 $120,000 $33,000 $71,000

C. Journal entries

Answer & Explanation Solved by verified expert

See Answer