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Question & Answer: The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate its business property. A balance sh…..

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:

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 Noncash assets 35,000 101.000 28,D00 61 ,000 48,000 177000 Liabilities Frick, capital (60%) Wilson capital (20%) Clarke, capital (20%) Total assets Total liabilities and capit $225,000 Noncash assets with a book value of $80,000 were sold for $48,000 and all liabilities were paid $9,000 was retained in the business to cover liquidation expenses before distributing available cash to the partners. Instructions First, prepare a predistribution plan for this partnership (not just the analysis needed to prepare the plan). Then, use your plan to find out how much cash would be distributed to each partner. The cash will be distributed by check so show what each partners check amount will be

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 Noncash assets 35,000 101.000 28,D00 61 ,000 48,000 177000 Liabilities Frick, capital (60%) Wilson capital (20%) Clarke, capital (20%) Total assets Total liabilities and capit $225,000 Noncash assets with a book value of $80,000 were sold for $48,000 and all liabilities were paid $9,000 was retained in the business to cover liquidation expenses before distributing available cash to the partners. Instructions First, prepare a predistribution plan for this partnership (not just the analysis needed to prepare the plan). Then, use your plan to find out how much cash would be distributed to each partner. The cash will be distributed by check so show what each partner’s check amount will be

Expert Answer

 

Dr. Cr.
Realisation A/C
Particular Amount Particular Amount
To non- cash assets 177000 By liabilities 35000
To cash: By cash:
Liabilities paid 35000 Assets( Book value-80000) 48000
Liquidation expenses 9000 By other non-cash assests(177000-80000) 97000
By loss on realisation 41000
Total 221000 Total 221000
Dr. Cash A/C Cr.
Particular Amount Particular Amount
To balance b/d 48000 By liabilities paid 35000
To non cash assets 48000 By liquidation expenses 9000
To other Non cash assets 97000 By Partner’s Capital 149000
Total 193000 Total 193000
Dr. Cr.
Parner’s Capital A/C
Particulars Frick Wilson Clarke Particulars Frick Wilson Clarke
To Realisation A/C 24600 8200 8200 By Capital 101000 28000 61000
To Cash 89400 29800 29800 By Clarke 13000 10000
To Frick & Wilson 23000
Total 114000 38000 61000 Total 114000 38000 61000
* We assume that Remaining non cash assets are sold at book value
* Realisation loss and cash is distributed in partners Profit sharing ratio i.e.(3:1:1)
* As per calculation Frick & Wilson will pay $23000 to clark in their profit sharing ratio.
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