Asked by Rauph Adeoba on May 20, 2024
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The balance sheet of Rogers, Dennis & Berry LLP prior to liquidation included the following: The three partners shared net income and losses in a 5:3:2 ratio, respectively. Noncash assets were sold for $60,000. Creditors were paid in full, partners were paid $35,000, and the balance of cash was retained pending future developments.Determine the cash to be retained and prepare a schedule to distribute $35,000 cash to the partners.
Noncash Assets
Assets owned by a business or individual that are not in the form of cash or cash equivalents, such as buildings, machinery, or intellectual property.
Net Income and Losses
The total amount of money a company has earned (net income) or lost (net losses) during a specific period.
Liquidation
The process of ending a business and distributing its assets to claimants, typically occurring when a company becomes insolvent.
- Establish the method for allocating cash and other relevant assets during the closure of a partnership, focusing on the partners' capital accounts and the proportional sharing of profits and losses.
- Explore the consequences of disposing of noncash assets and clearing liabilities on the ultimate cash distribution within a partnership.
- Put into action the sharing ratios for profits and losses to determine the individual shares of profits, losses, and liquidation proceeds for partners.
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Learning Objectives
- Establish the method for allocating cash and other relevant assets during the closure of a partnership, focusing on the partners' capital accounts and the proportional sharing of profits and losses.
- Explore the consequences of disposing of noncash assets and clearing liabilities on the ultimate cash distribution within a partnership.
- Put into action the sharing ratios for profits and losses to determine the individual shares of profits, losses, and liquidation proceeds for partners.
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