qs 12 - 13 (algo) liquidation of partnership lv p3 the following information applies to the questions…

qs 12 - 13 (algo) liquidation of partnership lv p3 the following information applies to the questions displayed below. the field, brown & snow are partners and share income and losses equality. the partner decide to liquidate the partnership when their capital balances are as follows: field, $131,900; brown, $166,200; and snow, $154,500. on may 31, the liquidation resulted in a loss of $405,900.\nqs 12 - 13 (algo) part 2\n2. assume that the partner with a deficit pays cash to cover the deficit. prepare the journal entries on may 31 to record (a) the cash received to cover the deficit and (b) the final disbursement of cash to the partners.\nview transaction list\njournal entry worksheet\n< 1 2\nrecord the cash received to cover the deficit.\nnote: enter debits before credits.\ntransaction general journal debit credit\n(a)

qs 12 - 13 (algo) liquidation of partnership lv p3 the following information applies to the questions displayed below. the field, brown & snow are partners and share income and losses equality. the partner decide to liquidate the partnership when their capital balances are as follows: field, $131,900; brown, $166,200; and snow, $154,500. on may 31, the liquidation resulted in a loss of $405,900.\nqs 12 - 13 (algo) part 2\n2. assume that the partner with a deficit pays cash to cover the deficit. prepare the journal entries on may 31 to record (a) the cash received to cover the deficit and (b) the final disbursement of cash to the partners.\nview transaction list\njournal entry worksheet\n< 1 2\nrecord the cash received to cover the deficit.\nnote: enter debits before credits.\ntransaction general journal debit credit\n(a)

Answer

Explanation:

Step1: Calculate the total capital before loss

The total capital before loss is the sum of the capital balances of Field, Brown and Snow. So, $131900 + 166200+154500=$452600$.

Step2: Calculate the deficit amount

The loss from liquidation is $405900$. After the loss, the remaining capital is $452600 - 405900=$46700$. Since the loss is shared equally among 3 partners, each partner's share of the loss is $\frac{405900}{3}=$135300$. Field's new - capital balance is $131900 - 135300=- $3400$. Brown's new - capital balance is $166200 - 135300=$30900$. Snow's new - capital balance is $154500 - 135300=$19200$. So, Field has a deficit of $3400$.

Step3: Record the cash received to cover the deficit

When Field pays cash to cover the deficit, the journal entry is:

Transaction General Journal Debit Credit
(a) Cash 3400
Field, Capital 3400

Step4: Record the final disbursement of cash

The total available cash after covering the deficit is $46700+3400 = $50100$. This cash is distributed among Brown and Snow in proportion to their capital balances after the loss (before the deficit - covering payment). The ratio of Brown's capital to the total of Brown and Snow's capital is $\frac{30900}{30900 + 19200}=\frac{30900}{50100}$, and Snow's ratio is $\frac{19200}{50100}$. Brown's share of the final disbursement is $\frac{30900}{50100}\times50100=$30900$. Snow's share of the final disbursement is $\frac{19200}{50100}\times50100=$19200$. The journal entry for the final disbursement is:

Transaction General Journal Debit Credit
(b) Brown, Capital 30900
Snow, Capital 19200
Cash 50100

Answer:

Transaction General Journal Debit Credit
(a) Cash 3400
Field, Capital 3400
(b) Brown, Capital 30900
Snow, Capital 19200
Cash 50100