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Problem 11-8A Liquidation of a partnership LOS CHECK FIGURES: a. Dr Craig, Capital: $549,000 b. Dr Craig, Capital: $114,000 Trish Craig and Ted Smith have a bio-energy and consulting business and share profit and losses in a 3.1 ratio. They decide to liquidate their partnership on December 31, 2017, when the balance sheet shows the following Craig and Senith Consuting Balance Sheet December 31. 2017 Assets Cash Llabilities 1.200 Accounts payable 50,400 Equity Less: Accumulated depreciation.... 199200 314.400 Trish Craig, capital $244.800 110.400 Total assets . $405,600 Ted Smith, capital. Total equity Total liabilities and equity.. 355.200 $405.600 Required Prepare the entries on December 31, 2017, to record the liquidation under each of the following independent assumptions: a. Property, plant, and equipment are sold for $720,000. b. Property, plant, and equipment are sold for $140,000.

Answer 1

a.

Transaction	General Journal	Debit	Credit
1	Cash	720000
	Accumulated depreciation	199200
	Property, plant, and equipment		513600
	Trish Craig, capital [3/4 x ($720000 - $314400)]		304200
	Ted Smith, capital [1/4 x ($720000 - $314400)]		101400
	(To record sale of property, plant, and equipment)
2	Accounts payable	50400
	Cash		50400
	(To record payment of liabilities)
3	Trish Craig, capital	549000
	Ted Smith, capital	211800
	Cash		760800
	(To record final distribution of cash)

Working:

Statement of Partnership Liquidation
				Partners
	Cash	Noncash Assets	Liabilities	T. Craig	T. Smith
Balances, December 31, 2017	91200	314400	50400	244800	110400
Sale of property, plant, and equipment	720000	-314400		304200	101400
Payment of liabilities	-50400		-50400
Remaining balance	760800	0	0	549000	211800
Final distribution	-760800			-549000	-211800
Total	0	0	0	0	0

b.

Transaction	General Journal	Debit	Credit
1	Cash	140000
	Accumulated depreciation	199200
	Trish Craig, capital [3/4 x ($140000 - $314400)]	130800
	Ted Smith, capital [1/4 x ($140000 - $314400)]	43600
	Property, plant, and equipment		513600
	(To record sale of property, plant, and equipment)
2	Accounts payable	50400
	Cash		50400
	(To record payment of liabilities)
3	Trish Craig, capital	114000
	Ted Smith, capital	66800
	Cash		180800
	(To record final distribution of cash)

Working:

Statement of Partnership Liquidation
				Partners
	Cash	Noncash Assets	Liabilities	T. Craig	T. Smith
Balances, December 31, 2017	91200	314400	50400	244800	110400
Sale of property, plant, and equipment	140000	-314400		-130800	-43600
Payment of liabilities	-50400		-50400
Remaining balance	180800	0	0	114000	66800
Final distribution	-180800			-114000	-66800
Total	0	0	0	0	0