Question

After the accounts are closed on February 3, 2016, prior to liquidating the partnership, the capital accounts of William Gerloff, Joshua Chu, and Courtney Jewett are $19,520, $4,080, and $22,180, respectively. Cash and noncash assets total $4,880 and $55,940, respectively. Amounts owed to creditors total $15,040. The partners share income and losses in the ratio of 2:1:1. Between February 3 and February 28, the noncash assets are sold for $36,020, the partner with the capital deficiency pays the deficiency to the partnership, and the liabilities are paid.

Required:
1. Prepare a statement of partnership liquidation, indicating (a) the sale of assets and division of loss, (b) the payment of liabilities, (c) the receipt of the deficiency (from the appropriate partner), and (d) the distribution of cash. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers (balance deficiencies, payments, cash distributions, divisions of loss), use a minus sign. If there is no amount to be reported for items (a) - (d), the cell can be left blank. However, in the balance rows, a balance of zero MUST be indicated by entering "0".
2. Assume the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency. Journalize the entries on Feb. 28 to (a) allocate the partner’s deficiency and (b) distribute the remaining cash. Refer to the Chart of Accounts for exact wording of account titles.
1. Prepare a statement of partnership liquidation, indicating (a) the sale of assets and division of loss, (b) the payment of liabilities, (c) the receipt of the deficiency (from the appropriate partner), and (d) the distribution of cash. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers (balance deficiencies, payments, cash distributions, divisions of loss), use a minus sign. If there is no amount to be reported for items (a) - (d), the cell can be left blank. However, in the balance rows, a balance of zero MUST be indicated by entering "0".
Score: 95/230
Gerloff, Chu, and Jewett
Statement of Partnership Liquidation
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1 Cash + Noncash Assets = Liabilities + Capital, Gerloff (2/4) + Capital, Chu (1/4) + Capital, Jewett (1/4)
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3
4
5 ✔
6 ✔
7 ✔
8 Balances
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10 ✔

Answer 1

Partnership of William Gerloff, Joshua Chu, and Courtney Jewett

1. Statement of Partnership Liquidation

William Gerloff Joshua Chu Courtney Jewett

Capital accounts $19,520 $4,080 $22,180

Share of loss (9,960) (4,980) (4,980)

Capital balances $9,560 (900) $17,200

Cash receipt 900

Payment of cash (9,560) $0 (17,200)

Balance 0 0 0

Cash balance:

Cash on February 3, 2016 = $4,880

Sale of non-cash assets = 36,020

Total cash balance = $40,920

Payment to creditors (15,040)

Cash deficiency receipt 900

Cash balance $26,780

2. Journal Entries:

Debit Capital accounts:

Gerloff $600

Jewett $300

Credit Chu $900

To allocate the Chu's capital deficiency to the two partners.

Debit Capital accounts:

Gerloff $8,660

Chu $16,900

Credit Cash $25,560

To distribute the remaining cash.

Step-by-step explanation:

a) Data and Calculations:

Capital account balances:

William Gerloff $19,520

Joshua Chu $4,080

Courtney Jewett $22,180

Cash = $4,880

Non-cash assets $55,940

Creditors = $15,040

Income and losses sharing ratio = 2:1:1

Sale of non-cash assets = $36,020

Loss from the sale = 19,920

Statement of Partnership Liquidation (With Chu declaring bankruptcy):

William Gerloff Joshua Chu Courtney Jewett

Capital accounts $19,520 $4,080 $22,180

Share of loss (9,960) (4,980) (4,980)

Capital balances $9,560 (900) $17,200

Allocation of deficiency (600) 900 (300)

Payment of cash (8,960) $0 (16,900)

Balance 0 0 0