(Question and 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:

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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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