Recording a Gain or a Loss on the Sale of Noncash Assets by a Partnership Hudson and

Chapter 28, Problem 28-6

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QUESTION:

Recording a Gain or a Loss on the Sale of Noncash Assets by a Partnership

Hudson and Franklin are in the process of liquidating their partnership. They share profits and losses in a 3:1 ratio. They have sold all of the partnership’s noncash assets. The transactions for the sales follow.

Instructions In your working papers, record the journal entries for the sale of noncash assets. Use general journal page 120.

Analyze Explain why losses are distributed to the partners’ capital accounts before any cash is paid out to the partners.

Questions & Answers

QUESTION:

Recording a Gain or a Loss on the Sale of Noncash Assets by a Partnership

Hudson and Franklin are in the process of liquidating their partnership. They share profits and losses in a 3:1 ratio. They have sold all of the partnership’s noncash assets. The transactions for the sales follow.

Instructions In your working papers, record the journal entries for the sale of noncash assets. Use general journal page 120.

Analyze Explain why losses are distributed to the partners’ capital accounts before any cash is paid out to the partners.

ANSWER:

                                                                 Step 1 of 4

Non-cash assets are those assets that remain in the business that cannot be converted into cash so easily. Upon winding up the business, these assets are released to receive cash.

                                                                 

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