The partners in New Yorker Company decide to liquidate the firm when the balance sheet shows the following.
NEW YORKER COMPANY
Balance Sheet
May 31, 2010
Assets
Liabilities and Owners' Equity
Cash $27,700 Notes payable $13,140
Accounts receivable 24,790 Accounts payable 27,210
Allowance for doubtful accounts (1,110) Wages payable 3,880
Merchandise inventory 34,830 M. Mantle, Capital 33,330
Equipment 21,370 W. Mays, Capital 21,610
Accumulated depreciation-equipment
(5,370)
D. Snider, Capital
3,040
Total
$102,210
Total
$102,210
The partners share income and loss 5 : 3 : 2. During the process of liquidation, the following transactions were completed in the following sequence.
A total of $55,310 was received from converting noncash assets into cash.
Gain or loss on realization was allocated to partners.
Liabilities were paid in full.
D. Snider paid his capital deficiency.
Cash was paid to the partners with credit balances.
Post to the cash and capital accounts.
Cash
Bal. (3)
(1) (5)
(4)
M. Mantle, Capital
(2) Bal.
(5)
W. Mays, Capital
(2) Bal.
(5)
D. Snider, Capital
(2) Bal.
(4)
Assume that Snider is unable to pay the capital deficiency.(For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)
Prepare the entry to allocate Snider's debit balance to Mantle and Mays.
Prepare the entry to record the final distribution of cash.
Account/Description Debit Credit
1.
2.
Prepare the entries to record the transactions. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)
Account/Description Debit Credit
1.
(To record realization of noncash assets)
2.
(To allocate gain (loss) to partner's capital accounts)
3.
(To record payment of liabilities)
4.
(To record receipt of cash from D. Snider on account of capital deficiency.)
5.
Actually I've solved most of the problem, however I'm confused about the kind of information they need in this part:
Prepare the entry to allocate Snider's debit balance to Mantle and Mays.
Prepare the entry to record the final distribution of cash.
Account/Description Debit Credit
1. I put here
Cash 56,110 (thats
55,310+800)
Depreciation 5,370
loss of realization 19,200
2. ? ?
? ?
? ?
And in the first part where it says: Post to the cash and capital accounts:
cash
Bal.27,700 (3)44,230
(1)55,310 (5)39,580
(4) 800
83,610 ?
M. Mantle, Capital
(2)9,600 Bal. 33,300
(5)39,580
? 23,730
M. Mays, Capital
(2)5,760 Bal. 21,610
(5)39,580
? 15,850
M. Snider, Capital
(2)3,840 Bal. 3,840
(4) 800
? 0
Also,please let me know if the part solved is correct too. Thanks
To determine the entries to allocate Snider's debit balance to Mantle and Mays, we need to calculate Snider's capital deficiency.
Step 1: Determine Snider's Capital Deficiency
Snider's capital deficiency can be calculated by subtracting Snider's credit balance from his debit balance (as shown in the cash and capital accounts). In this case, his capital deficiency is $3,040 (debit balance).
Step 2: Allocate Snider's Capital Deficiency to Mantle and Mays
According to the partnership agreement, the partners share income and loss in a 5:3:2 ratio. To allocate Snider's capital deficiency, we will use this ratio.
Allocate Snider's capital deficiency based on the ratio:
Mantle's share = (5 / 10) * $3,040 = $1,520
Mays's share = (3 / 10) * $3,040 = $912
The entry to allocate Snider's debit balance to Mantle and Mays is as follows:
Debit: M. Mantle, Capital - $1,520
Debit: W. Mays, Capital - $912
Credit: D. Snider, Capital - $3,040
To record the final distribution of cash, we need to determine the amount of cash available for distribution.
Step 1: Determine Cash Available for Distribution
To determine the cash available for distribution, we need to subtract the total liabilities from the total cash received from converting noncash assets into cash.
Total liabilities = Notes payable + Accounts payable + Wages payable
Total liabilities = $13,140 + $27,210 + $3,880 = $44,230
Cash available for distribution = Total cash received - Total liabilities
Cash available for distribution = $55,310 - $44,230 = $11,080
The entry to record the final distribution of cash is as follows:
Debit: M. Mantle, Capital - distribution amount
Debit: W. Mays, Capital - distribution amount
Credit: Cash - $11,080 (or the actual distribution amount)
To record the transactions, we need to analyze each transaction and determine the accounts affected and their corresponding debit or credit amounts.
1. To record realization of noncash assets:
Debit: Cash - amount received from converting noncash assets into cash
Credit: Assets - noncash assets (e.g., accounts receivable, inventory, equipment)
2. To allocate gain (loss) to partners' capital accounts:
Debit: Gain (if applicable) - allocated amount
or
Credit: Loss (if applicable) - allocated amount
Debit: M. Mantle, Capital - Mantle's share of gain (or less share of loss)
Debit: W. Mays, Capital - Mays's share of gain (or less share of loss)
3. To record payment of liabilities:
Debit: Liabilities - specific liability amount
Credit: Cash - amount paid to settle the liabilities
4. To record receipt of cash from D. Snider on account of capital deficiency:
Debit: Cash - amount received from Snider
Credit: D. Snider, Capital - Snider's capital deficiency amount (or the actual amount received)
5. To record the final distribution of cash:
Debit: M. Mantle, Capital - distribution amount
Debit: W. Mays, Capital - distribution amount
Credit: Cash - distribution amount
Please note that the specific debit and credit amounts will depend on the actual values involved in the transactions.