The prince robbins partnership

Fred and George have been in partnership for many years. The partners, who share profits and losses on a 60:40 basis, respectively, wish to retire and have agreed to liquidate the business. Liquidation expenses are estimated to be $10,000. At the date the partnership ceases operations, the balance sheet is as follows:

Cash

$

100,000

Liabilities

$

80,000

Noncash assets

200,000

Fred, capital

100,000

George, capital

120,000

Total assets

$

300,000

Total liabilities and capital

$

300,000

1.

Prepare journal entries for the following transactions: (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

a.

Distributed safe cash payments to the partners.

b.

Paid $40,000 of the partnership’s liabilities.

c.

Sold noncash assets for $220,000.

d.

Distributed safe cash payments to the partners.

e.

Paid all remaining partnership liabilities of $40,000.

f.

Paid $8,000 in liquidation expenses; no further expenses will be incurred.

g.

Distributed remaining cash held by the business to the partners.

Ex. 2

A local partnership is to be liquidated. Commissions and other liquidation expenses are expected to total $19,000. The business’s balance sheet prior to the commencement of liquidation is as follows:

Cash

$ 27,000

Liabilities

$ 40,000

Noncash assets

254,000

Simpson, capital (20%)

18,000

Hart, capital (40%)

40,000

Bobb, capital (20%)

48,000

Reidl, capital (20%)

135,000

Total assets

$281,000

Total liabilities and capital

$281,000

Prepare a predistribution plan for this partnership.

Partner

Capital Balance

Loss Allocation

Maximum loss that can be absorb

Schedule 1

Sampson

Hart

Bobb

Reidl

Schedule 2

Hart

Bobb

Reidl

Schedule 3

Bobb

Reidl

Sampson

Hart

Bobb

Reidl

Reported balances

Assumed loss

Schedule 1

Adjusted Balances

Assumed loss

Schedule 2

Adjusted balances

Assumed loss

Schedule 3

Adjusted balances

EX. 3

The Prince-Robbins partnership has the following capital account balances on January 1, 2015:

Prince, Capital

$

70,000

Robbins, Capital

60,000

Prince is allocated 80 percent of all profits and losses with the remaining 20 percent assigned to Robbins after interest of 10 percent is given to each partner based on beginning capital balances.

On January 2, 2015, Jeffrey invests $37,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 10 percent interest is still to go to each partner. Profits and losses will then be split as follows: Prince (50%), Robbins (30%), and Jeffrey (20%). In 2015, the partnership reports a net income of $15,000.