On June 3,2010, the firm of McAdams, Cooper, and Zhang decided to liquidate their partnership. The partners have capital balances of $14,000,$84,000 and $118,00, respectively. The cash balance is $29,000, the book values of noncash assets total $242,000 and liabilities total $55,000. The partners share income and losses in the ratio of 1:2:2.
1. Prepare a statement of partnership liquidation, covering the period June 3-29,2010, for each of the following independent assumptions:
a. All of the noncash assets are sold for $290,000 in cash, the creditors are paid, and the remaining cash is distributed to the partners.
b. All of the noncash assets are sold for $132,000 in cash, the creditors are paid, the partner with the debit capital balance pays the amount owed to the firm, and the remaining cash is distributed to the partners.
2. Assume the partner with the capital deficiency in part (b) above declares bankruptcy and is unable to pay the deficiency. Journalize the entries to (a) allocate the partner's deficiency and (b) distribute the remaining cash.