After the accounts are closed on April 10, 2014, prior to liquidating the partnership, the capital
accounts of Zach Fairchild, Austin Lowes, and Amber Howard are $42,000, $7,500, and $36,500,
respectively. Cash and noncash assets total $23,500 and $84,500, respectively. Amounts owed to creditors
total $22,000. The partners share income and losses in the ratio of 1:1:2. Between April 10 and April 30,
the noncash assets are sold for $48,500, the partner with the capital deficiency pays the deficiency to the
partnership, and the liabilities are paid.
Instructions
A. Prepare a statement of partnership liquidation, indicating (a) the sale of assets and division of loss, (b)
the payment of liabilities, (c) the receipt of the deficiency (from the appropriate partner), and (d) the
distribution of cash.
B. Assume the partner with the capital deficiency declares bankruptcy and is unable to pay the
deficiency. Journalize the entries to (a) allocate the partner’s deficiency and (b) distribute the
remaining cash.