Liquidation of Partnerships
Table of Contents
I.
II.
III.
IV.
V.
VI.
The
The
The
The
The
The
Case Problem
Handout
Solution for Part (a)
Journal Entries for Part (a)
Solution for Part (b)
Journal Entries for Part (b)
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The Case
Printer
Friendly
Version
Oh, 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
Non-Cash Assets
8,100
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 noncash assets are sold for (a) $70,600, and (b) $20,600, and the deficient partner
subsequently pays $2,700 of his deficiency.
Return
to TOC
The Handout
• Two pages follow:
– One for part (a)
– Another for part (b)
Return
to TOC
Name ________________________________
Principles of Financial and Managerial Accounting II
Liquidation of Partnerships
(a)
ASSETS
Description
beg bal
Cash
8,100
=
Printer
Friendly
Version
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilitie
s
70,600
27,500
Oh (2)
23,300
Are (1)
12,100
Ewe (2)
15,800
a
balances
b
balances
c
balances
Return
to TOC
Principles of Financial and Managerial Accounting II
Liquidation of Partnerships
(b)
ASSETS
Description
beg bal
Cash
8,100
=
Non-Cash
70,600
Printer
Friendly
Version
LIABILITIES + OWNERS’ EQUITY
Liabilitie
s
27,500
Oh (2)
23,300
Are (1)
12,100
Ewe (2)
15,800
a
balances
b
balances
c
balances
d
balances
e
balances
Return
to TOC
The Solution: Part (a)
Return
to TOC
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
Cash
8,100
=
Non-Cash
70,600
LIABILITIES + OWNERS’ EQUITY
Liabilities
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
23,300
-12,100
-15,800
a realization
balances
b
balances
c
balances
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
Cash
8,100
=
Non-Cash
70,600
LIABILITIES + OWNERS’ EQUITY
Liabilities
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
23,300
-12,100
-15,800
+70,600
balances
b
balances
c
balances
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
Cash
=
Non-Cash
8,100
70,600
+70,600
-70,600
LIABILITIES + OWNERS’ EQUITY
Liabilities
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
23,300
-12,100
-15,800
balances
b
balances
c
balances
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
balances
Cash
=
Non-Cash
8,100
70,600
+70,600
-70,600
78,700
0
LIABILITIES + OWNERS’ EQUITY
Liabilities
Oh (2)
Are (1)
Ewe (2)
27,500
23,300
12,100
15,800
27,500
23,300
12,100
15,800
23,300
-12,100
-15,800
b
balances
c
balances
Bring down ALL the new balances.
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
balances
Cash
=
Non-Cash
8,100
70,600
+70,600
-70,600
78,700
0
LIABILITIES + OWNERS’ EQUITY
Liabilities
Oh (2)
Are (1)
Ewe (2)
27,500
23,300
12,100
15,800
27,500
23,300
12,100
15,800
23,300
-12,100
-15,800
b
balances
c
balances
The steps in liquidation are (essentially) always the same.
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
balances
Cash
=
Non-Cash
8,100
70,600
+70,600
-70,600
78,700
0
LIABILITIES + OWNERS’ EQUITY
Liabilities
Oh (2)
Are (1)
Ewe (2)
27,500
23,300
12,100
15,800
27,500
23,300
12,100
15,800
23,300
-12,100
-15,800
b pay creditors
balances
c
balances
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
Cash
=
Non-Cash
8,100
70,600
+70,600
-70,600
78,700
-27,500
0
LIABILITIES + OWNERS’ EQUITY
Liabilities
Oh (2)
Are (1)
Ewe (2)
27,500
23,300
12,100
15,800
27,500
23,300
12,100
15,800
23,300
-12,100
-15,800
-27,500
balances
c
balances
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c
Cash
=
Non-Cash
8,100
70,600
+70,600
-70,600
78,700
0
-27,500
51,200
LIABILITIES + OWNERS’ EQUITY
Liabilities
Oh (2)
Are (1)
Ewe (2)
27,500
23,300
12,100
15,800
27,500
23,300
12,100
15,800
23,300
12,100
15,800
23,300
-12,100
-15,800
-27,500
0
0
balances
Bring down ALL the new balances.
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
balances
c
Non-Cash
8,100
70,600
+70,600
-70,600
78,700
b pay creditors
balances
Cash
=
0
-27,500
51,200
LIABILITIES + OWNERS’ EQUITY
Liabilities
Oh (2)
Are (1)
Ewe (2)
27,500
23,300
12,100
15,800
27,500
23,300
12,100
15,800
23,300
12,100
15,800
23,300
-12,100
-15,800
-27,500
0
0
balances
The steps in liquidation are (essentially always the same.
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
Cash
Non-Cash
8,100
70,600
+70,600
-70,600
78,700
0
-27,500
balances
51,200
c pay partners
-51,200
balances
=
LIABILITIES + OWNERS’ EQUITY
Liabilities
Oh (2)
Are (1)
Ewe (2)
27,500
23,300
12,100
15,800
27,500
23,300
12,100
15,800
23,300
12,100
15,800
-23,300
-12,100
-15,800
-27,500
0
0
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
Cash
Non-Cash
8,100
70,600
+70,600
-70,600
78,700
0
-27,500
balances
51,200
c pay partners
-51,200
balances
=
0
LIABILITIES + OWNERS’ EQUITY
Liabilities
Oh (2)
Are (1)
Ewe (2)
27,500
23,300
12,100
15,800
27,500
23,300
12,100
15,800
23,300
12,100
15,800
-23,300
-12,100
-15,800
-27,500
0
0
0
0
0
0
0
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
Cash
Non-Cash
8,100
70,600
+70,600
-70,600
78,700
0
-27,500
balances
51,200
c pay partners
-51,200
balances
=
0
LIABILITIES + OWNERS’ EQUITY
Liabilities
Oh (2)
Are (1)
Ewe (2)
27,500
23,300
12,100
15,800
27,500
23,300
12,100
15,800
23,300
12,100
15,800
-23,300
-12,100
-15,800
-27,500
0
0
0
0
0
0
Make appropriate general journal entries based on this analysis.
0
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
Cash
=
Non-Cash
8,100
70,600
+70,600
-70,600
LIABILITIES + OWNERS’ EQUITY
Liabilitie
s
27,500
Oh (2)
23,300
Are (1)
Ewe (2)
12,100
15,800
balances
b
balances
c
Date
balances
Account Titles
Cash
Non-Cash Assets
Debit
23,300
70,600
Credit
-12,100
70,600
-15,800
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
Cash
=
Non-Cash
8,100
70,600
+70,600
-70,600
78,700
0
-27,500
LIABILITIES + OWNERS’ EQUITY
Liabilitie
s
Oh (2)
Are (1)
Ewe (2)
27,500
23,300
12,100
15,800
27,500
23,300
12,100
15,800
23,300
-12,100
-15,800
-27,500
balances
c
balances
Date
Account Titles
Liabilities
Cash
Debit
Credit
27,500
27,500
a) Assuming the non-cash assets were sold for $70,600.
ASSETS
Description
Cash
beg bal
a realization
balances
Non-Cash
8,100
70,600
+70,600
-70,600
78,700
b pay creditors
=
0
-27,500
balances
51,200
c pay partners
-51,200
LIABILITIES + OWNERS’ EQUITY
Liabilitie
s
Oh (2)
Are (1)
27,500
23,300
12,100
15,800
27,500
23,300
12,100
15,800
23,300
12,100
15,800
-23,300
-12,100
-15,800
-27,500
0
0
balances
Date
Account Titles
Debit
Oh, Capital
23,300
Are, Capital
12,100
Ewe, Capital
15,800
Cash
Ewe (2)
Credit
51,200
The Solution: Part (b)
Return
to TOC
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a
balances
b
balances
c
balances
d
balances
e
balances
Cash
8,100
=
Non-Cash
70,600
LIABILITIES + OWNERS’ EQUITY
Liabilitie
s
27,500
Oh (2)
23,300
Are (1)
12,100
Ewe (2)
15,800
b) Assuming the non-cash assets were sold for $20,600.
Description
beg bal
a realization
balances
b
balances
c
balances
d
balances
e
balances
The $20,600 cash
for which the
ASSETS
= sold
LIABILITIES + OWNERS’ EQUITY
assets were
increases
Cash
Non-Cash cash.
Liabilities
Oh (2)
Are (1)
Ewe (2)
8,100
70,600
+20,600
-70,600
27,500
23,300
12,100
15,800
-20,000
-10,000
-20,000
b) Assuming the non-cash assets???
were sold for $20,600.
Description
beg bal
a realization
balances
b
balances
c
balances
d
balances
e
balances
Should non-cash
assets be reduced
$20,600 (to
ASSETS
= by
LIABILITIES
+ OWNERS’ EQUITY
keep the equation
Cash
Non-Cash
Liabilities
Oh (2)
Are (1)
Ewe (2)
in balance…
8,100
70,600
27,500
23,300
12,100
15,800
3,300
2,100
<4,200>
+20,600
28,700
0
???
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.
ALL of the non-cash
assets were sold.
Non-cash assets
should be reduced
by
ASSETS
$70,600.
Description
beg bal
a realization
balances
b
balances
c
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
0
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
0
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?
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
0
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.
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
Oh’s share of the loss is 2/5 of the $50,000 total.
balances
c
balances
d
balances
e
balances
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
Are’s share of the loss is 1/5 of the $50,000 total.
balances
c
balances
d
balances
e
balances
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
Ewe’s share of the loss is 2/5 of the $50,000 total.
balances
c
balances
d
balances
e
balances
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
27,500
Oh (2)
Are (1)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
Then bring down all the new balances.
balances
c
balances
d
balances
e
balances
Ewe (2)
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
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
Description
beg bal
a realization
balances
b pay creditors
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
-27,500
0
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
-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
Description
beg bal
a realization
balances
b pay creditors
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
0
c
balances
d
balances
e
balances
Bring down all the new balances.
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
Cash
d
balances
e
balances
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
c
balances
=
This amount of
cash is available
to be distributed
to the partners.
0
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Oh (2)
Are (1)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
0
c
balances
d
balances
e
balances
Ewe (2)
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
Description
beg bal
a realization
balances
b pay creditors
balances
c
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
0
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
Description
beg bal
a realization
balances
b pay creditors
balances
c
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
So how
0
should
the remaining
cash be
distributed?
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
0
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
Description
beg bal
a realization
balances
b pay creditors
balances
c
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Oh (2)
Are (1)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
0
Skip the transaction line and determine the desired balances instead.
balances
d
balances
e
balances
Ewe (2)
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
Cash
8,100
+20,600
28,700
Non-Cash
LIABILITIES + OWNERS’ EQUITY
Liabilities
Oh (2)
Are (1)
Ewe (2)
70,600 Three
27,500
23,300
12,100
things could
-70,600 potentially happen
-20,000
to the-10,000
0
-27,500
1,200
=
0
deficiency. He 3,300
could pay 1)
2,100
all, 2) some, or 3) none of
-27,500
the
deficiency.
0
3,300
2,100
15,800
-20,000
<4,200>
<4,200>
c
balances
d
balances
e
balances
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
Description
beg bal
a realization
balances
b pay creditors
balances
c
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
-27,500
0
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0 should be0
The 1,200
potential loss
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
Description
beg bal
a realization
balances
b pay creditors
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Oh (2)
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
0
balances
d
e
balances
Ewe (2)
23,300
c
balances
Are (1)
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
Description
beg bal
a realization
balances
b pay creditors
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
0
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
Description
beg bal
a realization
balances
b pay creditors
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
Oh (2)
23,300
Are (1)
12,100
15,800
These are their
-20,000
-10,000
DESIRED capital
27,500
3,300
balances. 2,100
-20,000
d
balances
e
balances
<4,200>
-27,500
0
0
3,300
2,100
2,800
1,400
c
balances
Ewe (2)
<4,200>
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
27,500
The difference
-27,500 between their -27,500
1,200 present
0 balance 0
and their desired
- 1,200
balance is the
amount of cash
they are entitled
to receive.
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
2,800
1,400
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
2,800
1,400
-27,500
0
0
- 1,200 $3,300 - 2,800 = $500
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
0
- 1,200 $3,300 - 2,800 = $500
- 500
2,800
1,400
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
27,500
The difference
-27,500 between their -27,500
1,200 present
0 balance 0
and their desired
- 1,200
balance is the
amount of cash
they are entitled
to receive.
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
- 500
2,800
1,400
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
- 1,200
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
0
$2,100 - 1,400 = $700
2,800
1,400
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
- 1,200
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-27,500
0
0
$2,100 - 1,400 = $700
2,800
- 700
1,400
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
- 1,200
27,500
Oh (2)
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
-500
- 700
2,800
1,400
-27,500
0
0
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
d
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
- 500
-700
2,800
1,400
-27,500
0
0
- 1,200
0
Oh (2)
0
0
<4,200>
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
- 500
-700
2,800
1,400
-27,500
0
0
- 1,200
0
Oh (2)
0
0
<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
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
- 500
-700
2,800
1,400
-27,500
0
0
- 1,200
0
Oh (2)
0
0
d
balances
e
balances
The problem says the deficient partner pays $2,700 of his deficiency.
<4,200>
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
Cash
beg bal
a realization
balances
balances
Liabilities
8,100
70,600
27,500
+20,600
-70,600
0
-27,500
1,200
c pay partners
LIABILITIES + OWNERS’ EQUITY
Non-Cash
28,700
b pay creditors
=
27,500
0
d received cash
Are (1)
Ewe (2)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
- 500
-700
2,800
1,400
-27,500
0
0
- 1,200
balances
Oh (2)
0
0
+ 2,700
balances
e
balances
Cash of $2,700 is received from the deficient partner.
<4,200>
+2,700
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
d received cash
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Are (1)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
0
0
3,300
2,100
<4,200>
- 500
-700
0
0
2,800
1,400
+ 2,700
2,700
Ewe (2)
-27,500
- 1,200
0
Oh (2)
<4,200>
+2,700
0
0
2,800
e
balances
New balances are determined in each column.
1,400
<1,500>
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
d received cash
balances
e
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
Again 0there is money
to be distributed to the
-27,500 partners, and the
-27,500
1,200 process
0 repeats. 0
28,700
- 1,200
0
0
0
Oh (2)
Are (1)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
3,300
2,100
<4,200>
- 500
-700
2,800
1,400
+ 2,700
2,700
Ewe (2)
<4,200>
+2,700
0
0
2,800
1,400
<1,500>
b) Assuming the non-cash assets were sold for $20,600.
ASSETS
Description
beg bal
a realization
balances
b pay creditors
balances
c pay partners
balances
d received cash
balances
e pay partners
balances
Cash
=
LIABILITIES + OWNERS’ EQUITY
Non-Cash
Liabilities
8,100
70,600
27,500
+20,600
-70,600
28,700
0
-27,500
1,200
27,500
Are (1)
23,300
12,100
15,800
-20,000
-10,000
-20,000
3,300
2,100
<4,200>
0
0
3,300
2,100
<4,200>
- 500
-700
0
0
2,800
1,400
+ 2,700
2,700
<4,200>
+2,700
0
0
- 2,700
0
Ewe (2)
-27,500
- 1,200
0
Oh (2)
0
0
2,800
1,400
- 1,800
-900
1,000
500
<1,500>
<1,500>