DEPARTMENT OF ACCOUNTING &FINANCE GROUP ASSIGNMENT ONE ON ADVANCED FINANCIAL ACCOUNTING II

1.Assume that Grace Partnership was owned and operated by partners A and B for the last ten years. The partners decided to liquidate the partnership and the liquidation process took between June 1 and October 15, 2020. The balance sheet of the partnership immediately prior to liquidation is shown below:

A&B Partnership

Balance Sheet

May 1,2020

Assets Liabilities & Partners’ Capital

Cash………………………….Br 25,000 Liabilities…………Br. 35000

Account receivables 20,000 A, capital…………... 110,000

Inventories……………………….55,000 B, Capital………….130,000

Fixed Asset……………………..175,000

Total…………………275,000Total………….275, 000

The following assumptions are made that the liquidation of A& B partnership proceeds in an orderly fashion from June 1,2020 through October 15,2020.

-June1,2020; The inventory is sold at auction for Br 45,000.A and B allocate all profits and

losses using 3:2 ratios, respectively

- July 15,2020: From the total Account receivable Br 15,000 is collected with the remainder

being written off as bad debts.

- August 20,2020 : The fixed asset are sold for a total of Br 200,000.

-August 25,2020:All partnership liabilities are paid

-September 10,2020 A total of Br 8000 liquidation expenses is paid to cover costs such as accounting and legal fees, commissions incurred in disposing of partnership property.

-October 15,2020: All remaining cash is distributed to the owners based on their final capital account balances.

Required (7 points)

a. Prepare the Statement of Partnership Liquidation

b. Prepare the necessary entry to record the transactions arising in the liquidation process

2.To illustrate, assume that the partners of XYZ Partnership who share net income or loss in a 4:3:2 ratios decide to liquidate the partnership and distribute cash in installments. The balance sheet just prior to liquidation on July 5, 2020 is as follows:

XYZ Partnership

Balance Sheet

July 5, 1999

Assets Liabilities & Partners’ Capital

Cash 10,000 Liabilities 65,000

Other Assets 190,000 X, Capital 30,000

Y, Capital 50,000

Z, Capital 55,000

Total 200,000 Total 200,000

Assume that non-cash assets were realized as follows

XY&Z LLP

Realization of Other Assets

July 6 to September 30, 1999

Date Book ValueProceed Loss

July 31 60,000 48,000 12,000

August 31 70,000 30,000 40,000

September 30 60,000 32,000 28,000

Total 190,000 110,000 80,000

Instructions: Based on the above data prepare statement of partnership liquidation using installment liquidation method.

3.Scenarios of Deficit Capital Balance

CashX Capital (4)Y Capital (2)Z Capital(4)

Capital Balance65,00045,00035,000(15,000)
Using the above data present the necessary journal entries based on the following assumptions.

Assumption 1.The deficit capital is entirely collected from partner with deficit capital

Present entries to record collection of cash and distribution of cash to partners with positive capital

Assumption 2.The deficit capital is considered to be loss to the remaining partners(un able to pay all deficit balances and the remaining partners willing to absorb the deficit balance)

Present entries to record

i. Distribution of loss (deficit)

ii. distribution of remaining cash balance to partners with positive capital

Assumption3.The deficit capital is partially paid by partner with deficit partner for Br 10,000 and the remainder deficit capital balance will bear by partner with positive balance.

 Present entries to record

i. Collection of cash partial payment by partners with deficit balance

ii. Distribution of loss (deficit)

iii. distribution of remaining cash balance to partners with positive capital

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