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 $ 60,000 Liabilities $ 43,000 Noncash assets 207,000 Frick, capital (60%) 120,000 Wilson, capital (20%) 33,000 Clarke, capital (20%) 71,000 Total assets $ 267,000 Total liabilities and capital $ 267,000
Part A Prepare a predistribution plan for this partnership
Part B The following transactions occur in liquidating this business: Distributed cash based on safe capital balances immediately to the partners. Liquidation expenses of $10,000 are estimated as a basis for this computation. Sold noncash assets with a book value of $90,000 for $60,000. Paid all liabilities. Distributed cash based on safe capital balances again. Sold remaining noncash assets for $49,000. Paid actual liquidation expenses of $8,000 only. 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 balances.
Part A Prepare a predistribution plan for this partnership
Part B The following transactions occur in liquidating this business: Distributed cash based on safe capital balances immediately to the partners. Liquidation expenses of $10,000 are estimated as a basis for this computation. Sold noncash assets with a book value of $90,000 for $60,000. Paid all liabilities. Distributed cash based on safe capital balances again. Sold remaining noncash assets for $49,000. Paid actual liquidation expenses of $8,000 only. 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 balances.
1 answer:
Answer:
PART A:
For preparing the predistribution plan we first caluclate the order of partnership elimination based on their capital accounts and the profit sharing ratio.
The lowest capital contributor is eliminated first and so on. Which is attached in figure 1
Then we prepared the predistribution plan which is attached in figure 2
PART B
The statement is attached in figure 3
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Answer:
See the errors identified below.
Explanation:
Note: The data in this question are merged together. They are therefore sorted before answering the question. See the attached pdf file for the complete question with the sorted data.
The explanation of the answer is now given as follows:
The following errors can be identified in the accountant's adjusting entries:
1.The accountant debited the account receivable for $5,000 (i.e. $23,250 - $18,250 = $5,000) without crediting laundry revenue.
Therefore, we should have:
Correct amount of laundry revenue = Laundry revenue in trial balance + (Adjusted account receivable - Unadjusted account receivable) = $182,100 + ($23,250 - $18,250) = $187100
2. The accountant debited laundry suppliers expense instead of crediting laundry suppliers for $3,000.
3. The the accountant credited Prepaid insurance for $3,600 (i.e. $5,200 - $1,600 = $3,600). However, the insurance expense was debited for $600.
4. Instead of crediting accumulated depreciation, the laundry equipment for depreciation expense was erroneously credited by the accountant for $13,000.
5. A debit of $1,000 to wages expense was not made by the accountant.
<u>Additional Note:</u>
After correcting the errors identified above, the correct adjusted trial balance will look as the one in the attached photo.
