Ask Question
BusinessBusiness
13 August, 03:54

The Hylands Hotels are liquidating their partnership. Before selling the assets and paying liabilities, the capital balances for the partners are: Martha $45,000; Nathan $36,000 and Orin $26,000. The profit and loss sharing ratio has been 2:2:1 for Martha, Nathan and Orin respectively. The partnership has cash $68,000, $75,000 noncash assets and $36,000 Accounts payable. I. Assume the partnership sells the non-cash assets and received $84,000 in cash. II. Assume the partnership sells the noncash assets and received $35,000. Instructions Under both assumptions, prepare the entries to record: (a) The sale of noncash assets. (b) The allocation of the gain or loss on liquidation to the partners. (c) Payment of creditors. (d) Distribution of cash to the partners.

+4
Answers (1)
  1. 13 August, 07:25
    0
    Ia. Debit Cash $84,000

    Credit Non-cash asset $75,000

    Gain on sale $9,000

    Ib. Debit Gain on sale $9,000

    Credit Martha, capital $3,600

    Credit Nathan, capita $3,600

    Credit Orin, capital $1,800

    Ic. Debit Accounts payable $36,000

    Credit Cash $36,000

    Id. Debit Martha, capital $48,600

    Debit Nathan, capita $39,600

    Debit Orin, capital $27,800

    Credit Cash $116,000

    IIa. Debit Cash $35,000

    Loss on sale $40,000

    Credit Non-cash asset $75,000

    IIb. Debit Martha, capital $16,000

    Debit Nathan, capital $16,000

    Debit Orin, capital $8,000

    Credit loss on sale $40,000

    IIc. Debit Accounts payable $36,000

    Credit Cash $36,000

    IId. Debit Martha, capital $29,000

    Debit Nathan, capita $20,000

    Debit Orin, capital $18,000

    Credit Cash $67,000

    Explanation:

    Ia. During the sale on non-cash asset, we debit the cash we received during the sale and credit the the non-cash asset and another credit of gain on sale. So we debit cash $84,000 credit Non-cash asset to remove it from the book in the amount of $75,000 and another credit of $9,000 gain on sale.

    Ib. The gain we credited earlier will be allocated to the partners based on the profiy and loss sharing ratio.

    Debit Gain on sale $9,000

    Credit Martha, capital (9,000 x 2/5) $3,600

    Credit Nathan, capital (9,000 x 2/5) $3,600

    Credit Orin, capital (9,000 x 2/5) $1,800

    Ic. To record payment to creditor, we simply debit Accounts payable in the amount of $36,000 and credit Cash in the same amount of $36,000.

    Id. The cash subject for allocation is the remaining amount after we deduct the cash we paid to outside creditor plus the amount we received from the sale on non-cash asset.

    Beginning cash $68,000 - $36,000 (payment to creditor) + $84,000 (cash received from sale of non-cash assets) = $116,000

    $116,000 - (45,000 + 36,000 + 26,000) = $9,000

    We now allocate the cash based on the capital balances of the partners and divide the excess based on the profit or loss sharing ratio.

    Debit Martha, capital (45,000 + (9,000 x 2/5) $48,600

    Debit Nathan, capital (36,000 + (9,000 x 2/5) $39,600

    Debit Orin, capital (26,000 + (9,000 x 2/5) $27,800

    Credit cash $116,000

    IIa. During the sale on non-cash asset, we debit the cash we received during the sale and credit the the non-cash asset. The difference between Cash received and the value of an asset will be charged to gain or loss. So we debit cash $35,000 and another debit of loss on sale in the amount of $40,000 then credit Non-cash asset to remove it from the book in the amount of $75,000 ...

    Ib. The loss we Debited earlier will be allocated to the partners based on the profit and loss sharing ratio.

    $75,000 - $35,000 = $40,000

    Debit Martha, capital (40,000 x 2/5) $16,000

    Debit Nathan, capital (40,000 x 2/5) $16,000

    Debit Orin, capital (40,000 x 2/5) $8,000

    Credit loss on sale $40,000

    Ic. To record payment to creditor, we simply debit Accounts payable in the amount of $36,000 and credit Cash in the same amount of $36,000.

    Id. The cash subject for allocation is the remaining amount after we deduct the cash we paid to outside creditor plus the amount we received from the sale on non-cash asset.

    Beginning cash $68,000 - $36,000 (payment to creditor) + $35,000 (cash received from sale of non-cash assets) = $67,000

    $67,000 - (45,000 + 36,000 + 26,000) = ($40,000)

    We now allocate the cash based on the capital balances of the partners and divide the losses based on the profit or loss sharing ratio.

    Debit Martha, capital (45,000 - (40,000 x 2/5)) $29,000

    Debit Nathan, capital (36,000 + (40,000 x 2/5)) $20,000

    Debit Orin, capital (26,000 + (40,000 x 2/5)) $18,000

    Credit cash $67,000
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “The Hylands Hotels are liquidating their partnership. Before selling the assets and paying liabilities, the capital balances for the ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
The demand for a good or service is determined by what
Answers (1)
Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:
Answers (1)
Coronado Company had the following department information for the month: Total materials costs $55000 Equivalent units of materials 10000 Total conversion costs $81000 Equivalent units of conversion costs 15000 What is the total manufacturing cost
Answers (1)
During the first quarter, Francum Company incurs the following direct labor costs: January $50,800, February $58,000, and March $65,200.
Answers (1)
The Robinson-Patman Act of 1936 Group of answer choices made conspiracy in the restraint of trade illegal.
Answers (1)
New Questions in Business
Sales and commission are based on selling price, not the costs you have been provided. Labor: 13.8 hours at 18.75 per hour Overhead: 92% of labor Material Costs: $65.
Answers (1)
When airbnb customers in malibu start paying hotel taxes, this will have the potential to raise the equilibrium price in this market and, therefore, decrease efficiency.
Answers (1)
Curtain Co. paid dividends of $14,000; $17,500; and $21,000 during Year 1, Year 2, and Year 3, respectively. The company had 2,400 shares of 7.0%, $100 par value preferred stock outstanding that paid a cumulative dividend.
Answers (1)
In order to accomplish the productivity plan, several Subject Matter Experts from various parts of the organizational have been enlisted. As a result, you have noticed friction and conflict among team members.
Answers (1)
The bond has a coupon rate of 6.83 percent, it makes semiannual payments, and there are 4 months to the next coupon payment. A clean price of $1,049 and the par value is $1,000. What is the invoice price
Answers (1)
Home » Business » The Hylands Hotels are liquidating their partnership. Before selling the assets and paying liabilities, the capital balances for the partners are: Martha $45,000; Nathan $36,000 and Orin $26,000.
Sign Up Forgot Password?