Allocating profits and losses to the partners, accounting for the liquidation of a partnership
ABAX is a partnership owned by Alders, Byron, and Calvin, who share profits and losses in the ratio of 1:3:4. The account balances of the partnership at June 30 follow.
|
ABAX Adjusted Trial Balance June 30, 2012 |
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|
Account Title |
Debit |
Credit |
|
Cash |
$ 33,000 |
|
|
Noncash assets |
117,000 |
|
|
Notes payable |
$ 32,000 |
|
|
Alders, capital |
22,000 |
|
|
Byron, capital |
50,000 |
|
|
Calvin, capital |
53,000 |
|
|
Alders, drawing |
9,000 |
|
|
Byron, drawing |
27,000 |
|
|
Calvin, drawing |
49,000 |
|
|
Sales revenue |
164,000 |
|
|
Salary expense |
74,000 |
|
|
Rent expense |
12,000 |
|
|
Totals |
$321,000 |
$321,000 |
Requirements
1. Prepare the June 30 entries to close the revenue, expense, income summary, and drawing accounts.
2. Insert the opening capital balances in the partners’ capital accounts, post the closing entries to their accounts, and determine each partner’s ending capital.
3. Prepare the June 30 entries to liquidate the partnership assuming the noncash assets are sold for $120,000.