Liquidation of Partnerships

Table of Contents I.The Case Problem II.The Handout III.The Solution for Part (a) IV.The Journal Entries for Part (a) V.The Solution for Part (b) VI.The Journal Entries for Part (b) This presentation is a work in progress. Most of these Table of Content items have been completed; others may be completed in the future. Hopefully, you will be able to go to the portion you did not get to complete in class or the portion you would like to review. Happy clicking!

The Case Oh, Are, and Ewe are partners who share profits and losses 2:1:2. A summary of the balances in the accounts in their general ledger at the time they decide to liquidate their partnership is as follows: Cash8,100 Non-Cash Assets70,600 Liabilities27,500 Oh, Capital23,300 Are, Capital12,100 Ewe, Capital15,800 Totals78,700 Instructions: Make the entries necessary to liquidate their partnership (1) in terms of the accounting equation, and (2) as general journal entries assuming the non- cash assets are sold for (a) $70,600, and (b) $20,600, and the deficient partner subsequently pays $2,700 of his deficiency. Return to TOC Printer Friendly Version

The Handout Two pages follow: –One for part (a) –Another for part (b) Return to TOC

Principles of Financial and Managerial Accounting II Liquidation of Partnerships (a) ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilitie s Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 a balances b c Name ________________________________ Return to TOC Printer Friendly Version

ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilitie s Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 a balances b c d e Principles of Financial and Managerial Accounting II Liquidation of Partnerships (b) Return to TOC Printer Friendly Version

The Solution: Part (a) Return to TOC

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization balances b c23,300-12,100-15,800 balances

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600 balances b c23,300-12,100-15,800 balances

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances b c23,300-12,100-15,800 balances

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances78,700027,50023,30012,10015,800 b balances c23,300-12,100-15,800 balances Bring down ALL the new balances.

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances78,700027,50023,30012,10015,800 b balances c23,300-12,100-15,800 balances The steps in liquidation are (essentially) always the same.

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances78,700027,50023,30012,10015,800 bpay creditors balances c23,300-12,100-15,800 balances

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances78,700027,50023,30012,10015,800 bpay creditors-27,500 balances c23,300-12,100-15,800 balances

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances78,700027,50023,30012,10015,800 bpay creditors-27,500 balances51, ,30012,10015,800 c23,300-12,100-15,800 balances Bring down ALL the new balances.

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances78,700027,50023,30012,10015,800 bpay creditors-27,500 balances51, ,30012,10015,800 c23,300-12,100-15,800 balances The steps in liquidation are (essentially always the same.

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances78,700027,50023,30012,10015,800 bpay creditors-27,500 balances51, ,30012,10015,800 cpay partners-51, , ,100-15,800 balances

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances78,700027,50023,30012,10015,800 bpay creditors-27,500 balances51, ,30012,10015,800 cpay partners-51, , ,100-15,800 balances000000

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances78,700027,50023,30012,10015,800 bpay creditors-27,500 balances51, ,30012,10015,800 cpay partners-51, , ,100-15,800 balances Make appropriate general journal entries based on this analysis.

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilitie s Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances b c23,300-12,100-15,800 balances DateAccount TitlesDebitCredit Cash70,600 Non-Cash Assets70,600

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilitie s Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances78,700027,50023,30012,10015,800 bpay creditors-27,500 balances c23,300-12,100-15,800 balances DateAccount TitlesDebitCredit Liabilities27,500 Cash27,500

a) Assuming the non-cash assets were sold for $70,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilitie s Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+70,600-70,600 balances78,700027,50023,30012,10015,800 bpay creditors-27,500 balances51, ,30012,10015,800 cpay partners-51,200-23,300-12,100-15,800 balances DateAccount TitlesDebitCredit Oh, Capital23,300 Are, Capital12,100 Ewe, Capital15,800 Cash51,200

The Solution: Part (b) Return to TOC

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilitie s Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 a balances b c d e

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70, , ,000-20,000 balances b c d e The $20,600 cash for which the assets were sold increases cash.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-CashLiabilitiesOh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600 balances28,70003,3002,100 b balances c d e ??? Should non-cash assets be reduced by $20,600 (to keep the equation in balance… ??? Or should non-cash assets be reduced by $70,600 because all were sold?

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances03,3002,100 b balances c d e ALL of the non-cash assets were sold. Non-cash assets should be reduced by $70,600.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances03,3002,100 b balances c d e So when $70,600 of assets were sold for $20,600, how did we do? Gain or loss?

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances03,3002,100 b balances c d e We incurred a $50,000 loss which must be allocated to the partners according to their AGREEMENT.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,70003,3002,100 b balances c d e Oh’s share of the loss is 2/5 of the $50,000 total.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,70003,3002,100 b balances c d e Are’s share of the loss is 1/5 of the $50,000 total.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,70003,3002,100 b balances c d e Ewe’s share of the loss is 2/5 of the $50,000 total.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 b balances c d e Then bring down all the new balances.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 b balances c d e This negative balance is called a “deficiency.” This partner did not have enough capital to absorb his share of the loss. The balances of the other two capital accounts are credit yet this balance is DEBIT.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances c d e The creditors are paid what they want and deserve.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances d e Bring down all the new balances.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances d e This amount of cash is available to be distributed to the partners.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances d e But these two partners have claims greater than the amount of cash available.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances d e And this partner does not deserve to share in the distribution. His deficiency means he actually OWES the p/s rather than the p/s owing him.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances d e So how should the remaining cash be distributed?

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances d e Two partners deserve some of the cash; one does not.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances d e Skip the transaction line and determine the desired balances instead.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,70003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances d e Three things could potentially happen to the deficiency. He could pay 1) all, 2) some, or 3) none of the deficiency. The desired balances are determined as if the worse thing happens: if the deficient partner pays NONE of his deficiency.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances d e The potential loss should be allocated to the partners in their profit and loss sharing agreement. The agreement was 2:1:2, but since the deficient partner is not participating, the ratio becomes 2:1.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances d e Two-thirds of the loss might be allocated to Oh if Ewe does not pay anything: $4,200 x 2/3 is $2,800.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances2,800 d balances e One-third of the loss might have be to allocated to Are if Ewe does not pay: $4,200 x 1/3 is $1,400.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 c balances2,8001,400 d balances e These are their DESIRED capital balances.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1,200 balances2,8001,400 d balances e The difference between their present balance and their desired balance is the amount of cash they are entitled to receive.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1,200 balances2,8001,400 d balances e $3, ,800 = $500

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1, balances2,8001,400 d balances e $3, ,800 = $500

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1, balances2,8001,400 d balances e The difference between their present balance and their desired balance is the amount of cash they are entitled to receive.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,70003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1,200 balances2,8001,400 d balances e $2, ,400 = $700

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,70003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1, balances2,8001,400 d balances e $2, ,400 = $700

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1, balances2,8001,400 d balances e

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1, balances0002,8001,400 d balances e

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1, balances0002,8001,400 d balances e Now these two partners should wait patiently hoping the deficient partner will pay all or some of his deficiency. But they are also prepared if he pays none.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1, balances0002,8001,400 d balances e The problem says the deficient partner pays $2,700 of his deficiency.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1, balances0002,8001,400 dreceived cash+ 2,700 balances e Cash of $2,700 is received from the deficient partner.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1, balances0002,8001,400 dreceived cash+ 2,700 balances2,700002,8001,400 e balances New balances are determined in each column.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,70003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1, balances0002,8001,400 dreceived cash+ 2,700 balances2,700002,8001,400 e balances Again there is money to be distributed to the partners, and the process repeats.

b) Assuming the non-cash assets were sold for $20,600. ASSETS = LIABILITIES + OWNERS’ EQUITY DescriptionCashNon-Cash Liabilities Oh (2)Are (1)Ewe (2) beg bal8,10070,60027,50023,30012,10015,800 arealization+20,600-70,600-20,000-10,000-20,000 balances28,700027,5003,3002,100 bpay creditors-27,500 balances1,200003,3002,100 cpay partners- 1, balances0002,8001,400 dreceived cash+ 2,700 balances2,700002,8001,400 epay partners- 2,700- 1, balances0001,000500