After accounts are closed on September 10, 2010, earlier to liquidating the partnership, the capital accounts of Kris Harken, Brett Sedlacek, and Amy Eldridge are $31,500, $5,700, and $23,700, respectively. Cash and noncash assets total $7,200 and $61,300, respectively. Amounts owed to creditors total $8,000. The partners share income and losses in the ratio of 1:1:2. Between September 10 and September 30, noncash assets are sold for $32,500, the partner with capital deficiency pays his or her deficiency to the partnership, and liabilities are paid.
1. Create 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 suitable partner), and
(d) The distribution of cash.
2. Suppose the partner with capital deficiency declares bankruptcy and is unable to pay deficiency. Journalize the entries to
(a) Allocate partner’s deficiency and
(b) Distribute the remaining cash.