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    Module 5: Accounting For Special Transactions Partnership Dissolution Part 1

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    Angel Alforque
    The document discusses the liquidation of two partnerships, ABC Partnership and another unnamed partnership. For ABC Partnership, which is undergoing a lump-sum liquidation, the document provides the steps and journal entries to account for the sale of assets, allocation of losses to partners, payment of liabilities, and distribution of remaining cash to partners. For the second partnership, undergoing an installment liquidation, the document similarly outlines the process for selling assets, allocating gains or losses, and distributing available cash to partners.

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    Module 5: Accounting For Special Transactions Partnership Dissolution Part 1

    Uploaded by

    Angel Alforque
    265 views3 pages
    The document discusses the liquidation of two partnerships, ABC Partnership and another unnamed partnership. For ABC Partnership, which is undergoing a lump-sum liquidation, the document provides the steps and journal entries to account for the sale of assets, allocation of losses to partners, payment of liabilities, and distribution of remaining cash to partners. For the second partnership, undergoing an installment liquidation, the document similarly outlines the process for selling assets, allocating gains or losses, and distributing available cash to partners.

    Original Description:

    Assessment

    Original Title

    Partnership Dissolution

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    The document discusses the liquidation of two partnerships, ABC Partnership and another unnamed partnership. For ABC Partnership, which is undergoing a lump-sum liquidation, the document provides the steps and journal entries to account for the sale of assets, allocation of losses to partners, payment of liabilities, and distribution of remaining cash to partners. For the second partnership, undergoing an installment liquidation, the document similarly outlines the process for selling assets, allocating gains or losses, and distributing available cash to partners.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    265 views3 pages

    Module 5: Accounting For Special Transactions Partnership Dissolution Part 1

    Uploaded by

    Angel Alforque
    The document discusses the liquidation of two partnerships, ABC Partnership and another unnamed partnership. For ABC Partnership, which is undergoing a lump-sum liquidation, the document provides the steps and journal entries to account for the sale of assets, allocation of losses to partners, payment of liabilities, and distribution of remaining cash to partners. For the second partnership, undergoing an installment liquidation, the document similarly outlines the process for selling assets, allocating gains or losses, and distributing available cash to partners.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Amabell R.

    Alforque
    Module 5: Accounting for Special Transactions Partnership Dissolution Part 1

    ASSESSMENT
    Answer the following questions for Assessment.

    1) Answer:
    1.) sell non-cash assets;
    2.) allocate any gain or loss on realization to the partners;
    3.) pay liabilities; and,
    4.) distribute cash to the partners

    2) Q1: ABC Partnership is on a what type of liquidation?


    Answer: Lump-sum liquidation

    Q2: How should the available cash be distributed to each partner? For solution, follow
    the steps illustrated in this module and provide for the journal entries.

    Answer:
    Step 1: Compute for the gain or loss on sale:
    a. Sale of other assets 800,000
    Net proceeds 800,000
    Less: Carrying amount of other assets (1,080,000)
    Loss on Sale: (280,000)

    Step 2: Allocate the gain or loss to the partners’ capital balances

    Answer: (Partner A:410,000; Partner B:230,000; Partner C:0)


    A B C Total
    Capital Balances 560,000 320,000 40,000 920,000
    Allocation of Loss (5:3:2) (140,000) (84,000) (56,000) (280,000)
    Total 420,000 236,000 (16,000) 640,000
    Allocation of capital deficiency
    (16K*(5/8:3/8)) (10,000) (6,000) 16000

    Amounts Received by Partners 410,000 230,000 0 640,000

    Journal entries are as follows:


    a. Cash 800,000
    Loss on Sale 280,000
    Other assets 1,080,000
    To record the realization of other assets
    b. A, Capital 140,000
    B, Capital 84,000
    C, Capital 56,000
    Loss on sale 280,000
    To record loss on sale
    c. Liabilities 280,000
    Cash 280,000
    To settle outside creditors
    d. A, Capital 410,000
    B, Capital 230,000
    Cash 640,000
    To record the settlement of the partner’s capital
    Q3: Make a Statement of Liquidation.

    ABC Partnership
    Statement of Realization and Liquidation

    Cash Other Liabilities A 50% B 30% C 20%


    assets
    Balances before
    liquidation
    120,000 1,080,000 280,000 560,000 320,000 40,000
    Realization and
    distribution of loss
    800,000 (1,080,000) (140,000) (84,000) (56,000)
    Balances after
    realization
    920,000 280,000 420,000 236,000 (16,000)
    Payment of
    liabilities (280,000) (280,000)
    Balances after
    payment of
    liabilities
    640,000 420,000 236,000 (16,000)
    Additional loss due
    to insolvency of C

    (10,000) (6,000) 16,000


    Balances after
    additional loss 640,000 410,000 230,000 0
    Payment to
    partners (640,000) (410,000) (230,000) 0
    3) Q1: The partnership is on a what type of liquidation?
    Answer: Installment Liquidation

    Q2: How should the available cash be distributed to each partner? For solution, follow
    the steps illustrated in this module.

    Answer: (Partner A:0; Partner B:30,000; Partner C:20,000)

    Step 1: Compute for the gain or loss on sale:


    Sale of other assets 70,000
    Net proceeds 70,000
    Less: Carrying amount of other assets (265,000)
    Loss on Sale: (195,000)

    Step 2: Allocate the gain or loss to the partners’ capital balances

    A (50%) B (25%) C (25%) Total


    Capital Balances 95,000 80,000 70,000 245,000
    Allocation of Loss (50:25:25 (97,500) (48,750) (48,750) (195,000)
    Total (2,500) 31,250 21,250 50,000
    Allocation of capital deficiency
    (16K*(5/8:3/8)) 2,500 (1,250) (1,250)

    Amounts Received by Partners 0 30,000 20,000 50,000

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