Reference no: EM131784262
This problem from Principles of Accounting 11th edition
The following events pertain to a partnership formed by Mark raymond and stan bryden to operate a floor cleaning company:
2011
Feb 14 the partnership was formed. Raymond transfered to the partnership $80,000 cash, land worth $80,000, a building worth $480,000, and a mortgage on the building of $240,000. Bryden transfered to the partnership $40,000 cash and equipment worth $160,000.
Dec.31 During 2011, the partnership earned income of just $84,000. The partnership agreement specifies that income and losses are to be divided by paying salaries of $40,000 to raymond and $60,000 to Bryden, allowing 8 percent interest on begining capital investments, and dividing any remainder equally.
2012
Jan. 1 To improve the prospects of the company, the partners decided to take in a new partner, Chuck Menzer, who had experience in the floor cleaning business. Menzer invested $156,000 for a 25% interest in the business. A bonus was transfered in equal amounts from the original partners' Capital accounts to Menzer's capital account.
Dec. 31 During 2012, the company earned income of $87,200. The new partnership agreement specified that income and losses would be divided by paying salaries of $60,000 to Bryden and $80,000 to Menzer (no salary to raymond) allowing 8% interest on begining capital balances after Menzer's admission, and dividing the remainder equally.
2013
Jan. 1 Because it appeared the business could not support the three partners, the partners decided to liquidate the partnership. The asset and liability accounts of the partnership were as follows: Cash, $407,200; Acct. rec. (net), $68,000; Land, $80,000; Building (net), $448,000; equipment (net), $236,000; Accounts Payable, $88,000; and mortgage payable, $224,000. The equipment was sold for $200,000. The accounts payable were paid. The loss was distributed equally to the partners' Capital accounts. A statement of liquidation was prepared, and the remaining assets and liabilities were distributed. Raymond agreed to accept cash plus the land and building at book value and the mortgage payable as payment for his share. Bryden accepted cash and accounts receivable for his share. Menzer was paid in cash.
REQUIRED
Prepare entries in journal form to record all of the facts above, Support your computations with schedules, and prepare a statement of liquidation in connectioin with the January 1, 2013, entries.
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