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Liquidating the Partnership with Losses on the Sale of Noncash Assets Guice and Ward
Chapter 28, Problem 28-5(choose chapter or problem)
Liquidating the Partnership with Losses on the Sale of Noncash Assets
Guice and Ward decide to end their partnership on September 21. They share profits and losses equally. The account balances of the partnership as of that date follow.
Cash $6,500
Inventory 8,800
Equipment (book value) 2,700
Accounts Payable 4,000
Guice, Capital 6,800
Ward, Capital 7,200
The partnership sold the inventory for $5,000 and the equipment for $2,000. All of the accounts payable will be paid in full with the cash.
Instructions In your working papers, prepare the journal entries to record the liquidation of this partnership. Use general journal page 85.
Analyze Conclude whether the partners’ capital accounts increased or decreased as a result of the liquidation (before the final distribution). Explain why.
Questions & Answers
QUESTION:
Liquidating the Partnership with Losses on the Sale of Noncash Assets
Guice and Ward decide to end their partnership on September 21. They share profits and losses equally. The account balances of the partnership as of that date follow.
Cash $6,500
Inventory 8,800
Equipment (book value) 2,700
Accounts Payable 4,000
Guice, Capital 6,800
Ward, Capital 7,200
The partnership sold the inventory for $5,000 and the equipment for $2,000. All of the accounts payable will be paid in full with the cash.
Instructions In your working papers, prepare the journal entries to record the liquidation of this partnership. Use general journal page 85.
Analyze Conclude whether the partners’ capital accounts increased or decreased as a result of the liquidation (before the final distribution). Explain why.
ANSWER:Step 1 of 5
Liquidation is the process of winding up the partnership business. So, in liquidation, all non-cash assets are released, liabilities are paid, and partners are settled with eh residual account.