Question

Dawes, Vida, and Waddel are liquidating their partnership. Before selling the assets and paying the liabilities, the capital balances are Dawes $50,000; Vida, $28,000; and Waddel, $14,000. The profit-and-loss-sharing ratio has been 3:4:3 for Dawes, Vida, and Waddel, respectively. The partnership has $74,000 cash, $49,000 non-cash assets, and $31,000 accounts payable. Assuming the partnership sells the non-cash assets for $59,000, 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

To sell the non-cash assets for $59,000, debit cash and credit non-cash assets. To allocate the gain or loss, debit the partners' capital accounts and credit the gain on liquidation. To pay the liabilities, debit accounts payable and credit cash. To distribute the remaining cash to partners, debit the partners' capital accounts and credit cash.

Step-by-step explanation:

To record the sale of non-cash assets for $59,000, the journal entry would be:

Debit Cash $59,000

Credit Non-cash assets $49,000

Credit Gain on sale of assets $10,000

To allocate the gain or loss on liquidation, the journal entry would be:

Debit Dawes' capital $4,500

Debit Vida's capital $6,000

Debit Waddel's capital $4,500

Credit Gain on liquidation $15,000

To pay the outstanding liabilities, the journal entry would be:

Debit Accounts payable $31,000

Credit Cash $31,000

To distribute the remaining cash to partners, the journal entry would be:

Debit Dawes' capital $21,500

Debit Vida's capital $22,500

Debit Waddel's capital $22,500

Credit Cash $66,500