Question

The Field, Brown & Snow partnership was begun with investments by the partners as follows: Field, $131,700; Brown, $167,700; and Snow, $155,400. The partners decide to liquidate, sharing all losses equally. On May 31, after all assets were sold and all creditors were paid, only $47,100 in partnership cash remained.
Required:
a. Compute the capital account balance of each partner after the liquidation of assets and the payment of creditors.
b. Assume that any partner with a deficit agrees to pay cash to the partnership to cover the deficit. Present the journal entries on May 31 to record (a) the cash receipt from the deficient partner(s) and (b) the final
disbursement of cash to the partners.
c. Assume that any partner with a deficit is not able to reimburse the partnership. Present journal entries (a) to transfer the deficit of any deficient partners to the other partners and (b) to record the final disbursement of cash to the partners.

Answer 1

Answer:

a. The capital account balance of each partner after the liquidation of assets and the payment of creditors would be as follows:

                             

                                   Field          Brown         Snow

Capital Balance         -4,200          31,800         19,500

b. a  

                          Debit       Credit

Cash                  4,200

Field capital                       4,200

b.                          Debit       Credit

Brown capital   31,800

Snow capital     19,500

Cash                                    51,300

c. a                        Debit       Credit

Brown capital  2100

Snow capital   2100

Field Capital                    4,200

b.                          Debit       Credit

Brown capital  29,700

Snow capital   17,400

Cash                               47,100

Explanation:

a. In order to calculate the capital account balance of each partner after the liquidation of assets and the payment of creditors we would have to make the following calculations:

                                             Field          Brown         Snow         Total

Initial Investment                 $131,700     $167,700    $155,400   454,800

Allocation of all losses:       135,900       135,900       135,900   407,700

(454,800-47,100)/3            

Capital Balance                   -4,200          31,800         19,500       47,100

b. a. The record of the cash receipt from the deficient partner(s) would be as follows:

                          Debit       Credit

Cash                  4,200

Field capital                       4,200

   b. The record the final  disbursement of cash to the partners would be as follows:

                          Debit       Credit

Brown capital   31,800

Snow capital     19,500

Cash                                    51,300

c. a Record to transfer the deficit of any deficient partners to the other partners would be as follows:

                         Debit       Credit

Brown capital  2100

Snow capital   2100

Field Capital                    4,200

Brown capital= 4,200/2=2100

Snow capital=4,200/2=2100

b. Record the final disbursement of cash to the partners would be as follows:

                        Debit       Credit

Brown capital  29,700

Snow capital   17,400

Cash                               47,100

Brown capital=31,800-2,100 =29,700

Snow capital=19,500-2,100=17,400