Reference no: EM132963001

Alex and Bess have been in partnership for many years. The partners, who share profits and losses on a 60:40 basis, respectively, wish to retire and have agreed to liquidate the business. Liquidation expenses are estimated to be $5,000.

At the date the partnership ceases operations, the balance sheet is as follows:

Cash$50,000
Liabilities$40,000
Noncash assets 150,000
Alex, capital 90,000

Bess, capital 70,000
Total assets$200,000
Total liabilities and capital$200,000

Problem 1: Prepare journal entries for the following transactions:

1. Distributed safe cash payments to the partners.
2. Paid $30,000 of the partnership's liabilities.
3. Sold noncash assets for $160,000.
4. Distributed safe cash payments to the partners.
5. Paid remaining partnership liabilities of $10,000.
6. Paid $4,000 in liquidation expenses; no further expenses will be incurred.
7. Distributed remaining cash held by the business to the partners.

Problem 2: Prepare a final statement of partnership liquidation.