Barney, Betty, and Rubble are partners in a business that is in the process of liquidation. On January 1, 2011, the ledger accounts show the balances indicated:
Cash $25,000 Barney capital $72,000 Inventory 72,000 Betty capital 28,000 Supplies 18,000 Rubble capital 15,000
The cash is distributed to partners on January 1, 2011. Inventory and supplies are sold for a lumpsum price of $81,000 on February 9, 2011, and on February 10, 2011, cash on hand is distributed to the partners in final liquidation of the business. REQUIRED
1. Prepare the journal entry to distribute available cash on January 1, 2011. Include a safe payments schedule as proper explanation of who should receive cash. 2. Prepare journal entries necessary on February 9, 2011, to record the sale of assets and distribution of the gain or loss to the partners capital accounts. 3. Prepare the
REQUIRED
1. The partners anticipate an installment liquidation. Prepare a cash distribution plan as of January 1, 2012, that includes a $50,000 contingency fund to help the partners predict when they will be included in cash distributions. 2. During January 2012, the inventories are sold for $100,000, the other liabilities are paid, and $50,000 is set aside for contingencies. The partners agree that loan balances should be closed to capital accounts and that remaining cash (less the contingency fund) should be distributed to partners. How much cash should each partner receive?
Cash $ Accounts receivable Inventories Land Buildings Accumulated depreciationbuildings Furniture and fi xtures Accumulated depreciationfurniture and fi xtures Accounts payable Jones capital (20%) Smith capital (30%) Tandy capital (50%)
300,000
The following transactions and events occurred during the liquidation process: January Inventories were sold for $20,000 cash, collections on account totaled
$14,000, and half of the amount due to creditors was paid. February Land costing $40,000 was sold for $60,000, the remaining land and buildings were sold for $40,000, half of the remaining receivables were collected, and the remainder were uncollectible. March The remaining liabilities were paid, and available cash was distributed to the partners in fi nal liquidation. REQUIRED: Prepare a statement of liquidation for the Jones, Smith, and Tandy partnership
Cash $ Receivablesnet Inventories Plant assetsnet Accounts payable $ Lin capital (50%) Mary capital (30%) Nell capital (20%) Total $
47,000 25,000 20,000 50,000 55,000 55,000 12,000 20,000 142,000 $142,000
ADDITIONAL INFORMATION
1. The partnership is to be liquidated as soon as the assets can be converted into cash. Cash realized on conversion of assets is to be distributed as it becomes available, except that $10,000 is to be held to provide for contingencies during the liquidation period. 2. Profits and losses on liquidation are to be divided in the percentages indicated in the trial balance.
REQUIRED
1. Prepare a cash distribution plan for the Lin, Mary, and Nell partnership. 2. If $25,000 cash is realized from the receivables and inventories during January 2012, how should the cash be distributed at the end of January? (Assume that this is the first distribution of cash during the liquidation period.).
March 1, 2008 Cash Accounts receivable net Inventories Land Buildings net Intangible assets Accounts payable Note payable unsecured Revenue received in advance Wages payable Mortgage payable Estate equity To record custody of Scott Corporation in liquidation. March 2008 Cash Estate equity Accounts receivable net To record collection of receivables and recognize loss. Cash Estate equity Inventories To record sale of inventories at a loss. Cash Estate equity Land Buildings net To record sale of land and buildings at a loss. Estate equity Intangible assets To write off intangible assets at a loss. Estate equity Administrative expenses payable new To accrue trustee expenses.
$ 4,000 8,000 36,000 20,000 100,000 26,000 $50,000 40,000 1,000 3,000 80,000 20,000
$ 26,000 $ 26,000
$ 8,200 $ 8,200
Scott Corporation in Trusteeship Balance Sheet at March 31, 2008 Assets Cash Liabilities And Deficit Accounts payable Note payable unsecured Revenue received in advance Wages payable Mortgage payable Administrative expenses payable new Total liabilities Less: Estate deficit Total liabilities less deficit Statement of Cash Receipts and Disbursements from March 1 to March 31, 2008 Cash balance, March 1, 2008 Add: Cash receipts Collections of receivables Sale of inventories Sale of land and buildings Less: Cash disbursements (none) Cash balance, March 31, 2008 Statement of Changes in Estate Equity from March 1 to March 31, 2008 Estate equity, March 1, 2008 Less: Loss on uncollectible receivables Loss on sale of inventories Loss on sale of land and buildings Loss on write-off of intangibles Administrative expenses Estate deficit, March 31, 2008 $ 800 16,600 30,000 26,000 8,200 $20,000 $ 4,000
$120,600
81,600 $61,600
April 2008 Mortgage payable $80,000 Cash $80,000 To record payment of secured creditors from proceeds from sale of land and buildings. Administrative expenses payable new Revenue received in advance Wages payable Cash To record payment of priority liabilities. $ 8,200 1,000 3,000 $12,200
Accounts payable $15,800 Note payable unsecured 12,600 Cash $28,400 To record payment of $.32 per dollar to unsecured creditors (available cash of $28,400 divided by unsecured claims of $90,000). Accounts payable Note payable unsecured Estate equity To write off remaining liabilities and close trustees records. $34,200 27,400 $61,600