Question

Dodds, Vida, and Walsh are liquidating their partnership. Before selling the assets and paying the liabilities, the capital balances are Dodds $44,000; Vida, $35,000; and Walsh, $20,000. The profit-and-loss-sharing ratio has been 2:2:1 for Dodds, Vida, and Walsh, respectively. The partnership has $79,000 cash, $47,000 non-cash assets, and $27,000 accounts payable.

1. Assuming the partnership sells the non-cash assets for $58,000, record the journal entries for the sale of non-cash assets, allocation of gain or loss on liquidation, the payment of the outstanding liabilities, and the distribution of remaining cash to partners.
2. Assuming the partnership sells the non-cash assets for $15,000, record the journal entries for the sale of non-cash assets, allocation of gain or loss on liquidation, the payment of the outstanding liabilities, and the distribution of remaining cash to partners.

Answer 1

• 1. When the non-cash assets are sold for $58,000, the journal entries would be as follows: debit Cash $58,000, credit Non-Cash Assets $58,000; debit Gain and credit Dodds' Capital $4,000, debit Gain and credit Vida's Capital $4,000, debit Loss and credit Walsh's Capital $8,000; debit Accounts Payable $27,000, credit Cash $27,000; and debit Cash $79,000, debit Dodds' Capital $10,000, debit Vida's Capital $10,000, debit Walsh's Capital $5,000, credit Partners' Capital $104,000.

• 2. When the non-cash assets are sold for $15,000, the journal entries would be as follows: debit Cash $15,000, credit Non-Cash Assets $15,000; debit Loss and credit Dodds' Capital $2,000, debit Loss and credit Vida's Capital $2,000, debit Loss and credit Walsh's Capital $11,000; debit Accounts Payable $27,000, credit Cash $27,000; and debit Cash $79,000, debit Dodds' Capital $10,000, debit Vida's Capital $10,000, debit Walsh's Capital $5,000, credit Partners' Capital $104,000.

Step-by-step explanation:

1. The journal entries for the sale of non-cash assets, allocation of gain or loss on liquidation, payment of outstanding liabilities, and distribution of remaining cash to partners, assuming the non-cash assets are sold for $58,000, would be as follows:

1. Sale of Non-Cash Assets: Debit Cash $58,000 and Credit Non-Cash Assets $58,000.
2. Allocation of Gain or Loss on Liquidation: Debit Gain and Credit Dodds' Capital $4,000, Debit Gain and Credit Vida's Capital $4,000, and Debit Loss and Credit Walsh's Capital $8,000.
3. Payment of Outstanding Liabilities: Debit Accounts Payable $27,000 and Credit Cash $27,000.
4. Distribution of Remaining Cash to Partners: Debit Cash $79,000, Debit Dodds' Capital $10,000, Debit Vida's Capital $10,000, and Debit Walsh's Capital $5,000, and Credit Partners' Capital $104,000.

2. The journal entries for the sale of non-cash assets, allocation of gain or loss on liquidation, payment of outstanding liabilities, and distribution of remaining cash to partners, assuming the non-cash assets are sold for $15,000, would be as follows:

1. Sale of Non-Cash Assets: Debit Cash $15,000 and Credit Non-Cash Assets $15,000.
2. Allocation of Gain or Loss on Liquidation: Debit Loss and Credit Dodds' Capital $2,000, Debit Loss and Credit Vida's Capital $2,000, and Debit Loss and Credit Walsh's Capital $11,000.
3. Payment of Outstanding Liabilities: Debit Accounts Payable $27,000 and Credit Cash $27,000.
4. Distribution of Remaining Cash to Partners: Debit Cash $79,000, Debit Dodds' Capital $10,000, Debit Vida's Capital $10,000, and Debit Walsh's Capital $5,000, and Credit Partners' Capital $104,000.