Accounting for Partnerships

Data for Sedgwick Company are presented bellow.

At December 31, Sedqwick Company has cash $20,000, noncash assets $100,000, liabilities $55,00, and the following capital balances:Floyd $45,000 and DeWitt $20,000. the firm is liquidated, and $105,000 in cash is received for the noncash assets. Floyd and DeWitt income ratios are 60% and 40%, respectively. Sedgwick Company now decides to liquidate the partnership.

Instructions

Prepare the entries to record:

1. The sale of noncash assets.
2. The allocation of the gain or loss on realization to the partners.
3. Payment of creditors.
4. Distribution of cash to the partners.

Solution