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Liquidation of Partnerships
Table of Contents
I.The Case ProblemII.The HandoutIII.The Solution for Part (a)IV.The Journal Entries for Part (a)V.The Solution for Part (b)VI. The Journal Entries for Part (b)
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The CaseOh, Are, and Ewe are partners who share profits and losses 2:1:2. A summary of the balances in the accounts in their general ledger at the time they decide to liquidate their partnership is as follows:
Cash 8,100
Non-Cash Assets 70,600
Liabilities 27,500
Oh, Capital 23,300
Are, Capital 12,100
Ewe, Capital 15,800
Totals 78,700 78,700
Instructions:
Make the entries necessary to liquidate their partnership (1) in terms of the accounting equation, and (2) as general journal entries assuming the non-cash assets are sold for (a) $70,600, and (b) $20,600, and the deficient partner subsequently pays $2,700 of his deficiency.
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The Handout
• Two pages follow:– One for part (a)– Another for part (b)
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Principles of Financial and Managerial Accounting IILiquidation of Partnerships(a)
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a
balances
b
balances
c
balances
Name ________________________________
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ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a
balances
b
balances
c
balances
d
balances
e
balances
Principles of Financial and Managerial Accounting IILiquidation of Partnerships(b)
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The Solution: Part (a)
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a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization
balances
b
balances
c 23,300 -12,100 -15,800
balances
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600
balances
b
balances
c 23,300 -12,100 -15,800
balances
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances
b
balances
c 23,300 -12,100 -15,800
balances
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances 78,700 0 27,500 23,300 12,100 15,800
b
balances
c 23,300 -12,100 -15,800
balances
Bring down ALL the new balances.
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances 78,700 0 27,500 23,300 12,100 15,800
b
balances
c 23,300 -12,100 -15,800
balances
The steps in liquidation are (essentially) always the same.
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances 78,700 0 27,500 23,300 12,100 15,800
b pay creditors
balances
c 23,300 -12,100 -15,800
balances
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances 78,700 0 27,500 23,300 12,100 15,800
b pay creditors -27,500 -27,500
balances
c 23,300 -12,100 -15,800
balances
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances 78,700 0 27,500 23,300 12,100 15,800
b pay creditors -27,500 -27,500
balances 51,200 0 0 23,300 12,100 15,800
c 23,300 -12,100 -15,800
balances
Bring down ALL the new balances.
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances 78,700 0 27,500 23,300 12,100 15,800
b pay creditors -27,500 -27,500
balances 51,200 0 0 23,300 12,100 15,800
c 23,300 -12,100 -15,800
balances
The steps in liquidation are (essentially always the same.
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances 78,700 0 27,500 23,300 12,100 15,800
b pay creditors -27,500 -27,500
balances 51,200 0 0 23,300 12,100 15,800
c pay partners -51,200 -23,300 -12,100 -15,800
balances
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances 78,700 0 27,500 23,300 12,100 15,800
b pay creditors -27,500 -27,500
balances 51,200 0 0 23,300 12,100 15,800
c pay partners -51,200 -23,300 -12,100 -15,800
balances 0 0 0 0 0 0
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances 78,700 0 27,500 23,300 12,100 15,800
b pay creditors -27,500 -27,500
balances 51,200 0 0 23,300 12,100 15,800
c pay partners -51,200 -23,300 -12,100 -15,800
balances 0 0 0 0 0 0
Make appropriate general journal entries based on this analysis.
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances
b
balances
c 23,300 -12,100 -15,800
balances
Date Account Titles Debit Credit
Cash 70,600
Non-Cash Assets 70,600
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances 78,700 0 27,500 23,300 12,100 15,800
b pay creditors -27,500 -27,500
balances
c 23,300 -12,100 -15,800
balancesDate Account Titles Debit Credit
Liabilities 27,500
Cash 27,500
a) Assuming the non-cash assets were sold for $70,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +70,600 -70,600
balances 78,700 0 27,500 23,300 12,100 15,800
b pay creditors -27,500 -27,500
balances 51,200 0 0 23,300 12,100 15,800
c pay partners -51,200 -23,300 -12,100 -15,800
balances
Date Account Titles Debit Credit
Oh, Capital 23,300
Are, Capital 12,100
Ewe, Capital 15,800
Cash 51,200
The Solution: Part (b)
Return to TOC
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a
balances
b
balances
c
balances
d
balances
e
balances
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances
b
balances
c
balances
d
balances
e
balances
The $20,600 cash for which the assets were sold increases cash.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600
balances 28,700 0 3,300 2,100 <4,200>
b
balances
c
balances
d
balances
e
balances
???Should non-cash assets be reduced by $20,600 (to keep the equation in balance…
???Or should non-cash assets be reduced by $70,600 because all were sold?
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 0 3,300 2,100 <4,200>
b
balances
c
balances
d
balances
e
balances
ALL of the non-cash assets were sold. Non-cash assets should be reduced by $70,600.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 0 3,300 2,100 <4,200>
b
balances
c
balances
d
balances
e
balances
So when $70,600 of assets were sold for $20,600, how did we do? Gain or loss?
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 0 3,300 2,100 <4,200>
b
balances
c
balances
d
balances
e
balances
We incurred a $50,000 loss which must be allocated to the partners according to their AGREEMENT.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 3,300 2,100 <4,200>
b
balances
c
balances
d
balances
e
balances
Oh’s share of the loss is 2/5 of the $50,000 total.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 3,300 2,100 <4,200>
b
balances
c
balances
d
balances
e
balances
Are’s share of the loss is 1/5 of the $50,000 total.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 3,300 2,100 <4,200>
b
balances
c
balances
d
balances
e
balances
Ewe’s share of the loss is 2/5 of the $50,000 total.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b
balances
c
balances
d
balances
e
balances
Then bring down all the new balances.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b
balances
c
balances
d
balances
e
balances
This negative balance is called a “deficiency.” This partner did not have enough capital to absorb his share of the loss. The balances of the other two capital accounts are credit yet this balance is DEBIT.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances
c
balances
d
balances
e
balances
The creditors are paid what they want and deserve.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances
d
balances
e
balances
Bring down all the new balances.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances
d
balances
e
balances
This amount of cash is available to be distributed to the partners.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances
d
balances
e
balances
But these two partners have claims greater than the amount of cash available.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances
d
balances
e
balances
And this partner does not deserve to share in the distribution. His deficiency means he actually OWES the p/s rather than the p/s owing him.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances
d
balances
e
balances
So how should
the remainingcash be
distributed?
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances
d
balances
e
balances
Two partners deserve some of the cash; one does not.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances
d
balances
e
balances
Skip the transaction line and determine the desired balances instead.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances
d
balances
e
balances
Three things could potentially happen to the deficiency. He could pay 1) all, 2) some, or 3) none of the deficiency.
The desired balances are determined as if the worse thing happens: if the deficient partner pays NONE of his deficiency.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances
d
balances
e
balances
The potential loss should be allocated to the partners in their profit and loss sharing agreement.
The agreement was 2:1:2, but since the deficient partner is not participating, the ratio becomes 2:1.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances
d
balances
e
balances
Two-thirds of the loss might be allocated to Oh if Ewe does not pay anything: $4,200 x 2/3 is $2,800.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances 2,800
d
balances
e
balances
One-third of the loss might have be to allocated to Are if Ewe does not pay: $4,200 x 1/3 is $1,400.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c
balances 2,800 1,400
d
balances
e
balances
These are their DESIRED capital
balances.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200
balances 2,800 1,400
d
balances
e
balances
The difference between their present balanceand their desired balance is the amount of cash they are entitled to receive.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200
balances 2,800 1,400
d
balances
e
balances
$3,300 - 2,800 = $500
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200 - 500
balances 2,800 1,400
d
balances
e
balances
$3,300 - 2,800 = $500
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200 - 500
balances 2,800 1,400
d
balances
e
balances
The difference between their present balanceand their desired balance is the amount of cash they are entitled to receive.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200
balances 2,800 1,400
d
balances
e
balances
$2,100 - 1,400 = $700
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200 - 700
balances 2,800 1,400
d
balances
e
balances
$2,100 - 1,400 = $700
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200 -500 - 700
balances 2,800 1,400
d
balances
e
balances
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200 - 500 -700
balances 0 0 0 2,800 1,400 <4,200>
d
balances
e
balances
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200 - 500 -700
balances 0 0 0 2,800 1,400 <4,200>
d
balances
e
balances
Now these two partners should wait patiently hoping the deficient partner will pay all or some of his deficiency. But they are also prepared if he pays none.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200 - 500 -700
balances 0 0 0 2,800 1,400 <4,200>
d
balances
e
balances
The problem says the deficient partner pays $2,700 of his deficiency.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200 - 500 -700
balances 0 0 0 2,800 1,400 <4,200>
d received cash + 2,700 +2,700
balances
e
balances
Cash of $2,700 is received from the deficient partner.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200 - 500 -700
balances 0 0 0 2,800 1,400 <4,200>
d received cash + 2,700 +2,700
balances 2,700 0 0 2,800 1,400 <1,500>
e
balances
New balances are determined in each column.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200 - 500 -700
balances 0 0 0 2,800 1,400 <4,200>
d received cash + 2,700 +2,700
balances 2,700 0 0 2,800 1,400 <1,500>
e
balances
Again there is money to be distributed to the partners, and the process repeats.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Description Cash Non-Cash Liabilities Oh (2) Are (1) Ewe (2)
beg bal 8,100 70,600 27,500 23,300 12,100 15,800
a realization +20,600 -70,600 -20,000 -10,000 -20,000
balances 28,700 0 27,500 3,300 2,100 <4,200>
b pay creditors -27,500 -27,500
balances 1,200 0 0 3,300 2,100 <4,200>
c pay partners - 1,200 - 500 -700
balances 0 0 0 2,800 1,400 <4,200>
d received cash + 2,700 +2,700
balances 2,700 0 0 2,800 1,400 <1,500>
e pay partners - 2,700 - 1,800 -900
balances 0 0 0 1,000 500 <1,500>