Question - The partnership of Frick, Wilson, and Clarke has been elected to cease all operations and liquidate its business property. A balance sheet drawn up at this time shows the following account balances:
Cash - $60,000
Noncash Assets - $219,000
Total Assets - $279,000
Liabilities - $40,000
Frick Cap (60%) - 129,000
Wilson Cap (20%) - 35,000
Clarke Cap (20%) - 75,000
Total liabilities and cap - 279,000
Part A - Prepare a pre-distribution plan for this partnership
Part B - The following transactions occur in liquidating this business:
1. Distributed cash based on safe capital balances immediately to the partners. Liquidation expenses of $8,000 are estimated as a basis for this computation.
2. Sold noncash assets with a book value of 94,000 for 60,000
3. Paid all liabilities
4. Distributed cash based on safe capital balances again.
5. Sold remaining noncash assets for 51,000
6. Paid actual liquidation expenses of 6,000 only.
7. Distributed remaining cash to the partners and closed the financial records of the business permanently.
Produce a final statement of liquidation for this partnership using the predistribution plan to determine payments of cash to partners based on safe capital balance.
Part C - Prepare journal entries to record the liquidation transactions reflected in the final statement of liquidation.