Question

Rex & Jacks Novelty Store, a partnership business, has planned to liquidate. Your task is to help them liquidate the partnership.Listed below are the remaining assets and liabilities of the business. Rex and Jack share all profits and losses equally.Assets:Cash in Bank $20,000Accounts Receivable $12,000Merchandise Inventory $42,000Equipment $60,000 Liabilities:Accounts Payable $15,500Partners’ Equity:Rex’s capital $59,250Jack’s capital $59,250Liquidation transactions are listed below:Customers will have to pay their accounts in full before the liquidation date.Merchandise inventory was sold for $40,000 resulting in a loss of $2,000 to the partnership.Equipment was sold to a local retailer for $70,000 resulting in a gain of $10,000.Accounts payable will be paid in full.Instructions:Journalize and post the journal entries.Calculate the share of each partner at end of the liquidation.

Answer 1

Answer:

The share of each partner at end of the liquidation is:  63,250.00

For Journal entries see attached file

Explanation:

The share of each partner at end of the liquidation is calculated as follows:

Liquidation balance = Asset – Liabilities + Net gain for Discontinued Operations  

Liquidation balance = 134,000.00 – 15,500.00 + 8,000.00

Liquidation balance = 126,500.00

As Rex and Jack share all profits and losses equally, 63,250.00 correspond to each one.