Answer:
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
