The partners in River Song Company decide to liquidate the firm when the balance sheet shows the following.
River Song Company
Balance Sheet
May 31, 2014
Assets Liabilities and Owner’s Equity
Cash$ 27,500 Notes payable$ 13,500
Accounts receivable 25,000 Accounts payable 27,000
Allowance for doubtful accounts( 1,000) Salaries payable 4,000
Inventory 34,500 A. Mangold, Capital 33,000
Equipment 21,000 S.Otis, capital 21,000
Accumulated depreciation( 5,500) P. Tyler, capital 3,000
Total$101,500 Total$101,500
The partner share income 5:3:2. During the process of liquidation, the following transactions were completed in the following sequence.
- 1. A total of $55,000 was received from converting noncash assets in cash.
- 2. Gain or loss on realization was allocated to partners.
- 3. Liabilities were paid in full.
- 4. P. Tyler paid his capital deficiency.
- 5. Cash was paid to the partners with credit balances.
Instructions
- Prepare the entries to record the transactions.
- Post to the cash and capital account.
