Response to the following problem:
The Red, White & Blue partnership was begun with investments by the partners as follows: Red, $175,000; White, $220,000; and Blue, $205,000. The operations did not go well, and the partners eventually decided to liquidate the partnership, sharing all losses equally. On August 31, after all assets were converted to cash and all creditors were paid, only $60,000 in partnership cash remained.
1. Compute the capital account balance of each partner after the liquidation of assets and the payment of creditors.
2. Assume that any partner with a deficit agrees to pay cash to the partnership to cover the deficit. Present the journal entries on August 31 to record (a) the cash receipt from the deficient partner(s) and (b) the final disbursement of cash to the partners.
3. Assume that any partner with a deficit is not able to reimburse the partnership. Present journal entries (a) to transfer the deficit of any deficient partners to the other partners and (b) to record the final disbursement of cash to the partners.