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ACE COMPANY
Balance Sheet
April 15, 2003
Assets
Cash
$5,000
Accounts Receivable
15,000
Inventory
18,000
Equipment
35,000
Accumulated Amort. Equip. (8000)
$65,000
The non-cash assets are sold on April 18 for $75,000. The net book value
of the assets is $60,000 (15,000 + 18,000 + $35,000 - $8,000). This is a
gain of $15,000 and the following entry would be made:
April 18
2.
Cash
75,000
Accumulated Amort. Equip.
8,000
Accounts Receivable
Inventory
Equipment
Gain on Realization
To record the realization of non-cash assets
15,000
18,000
35,000
15,000
April 18
Gain on Realization
15,000
R. Aube, Capital
P. Chordia, Capital
W. Elliott, Capital
To allocate gain to partners capital accounts
7,500
5,000
2,500
3.
April 23
4.
Notes Payable
15,000
Accounts Payable
16,000
Cash
To record payment of partnership liabilities.
31,000
April 25
The non-cash assets are sold on April 18 for $42,000. The net book value
of the assets is $60,000 (15,000 + 18,000 + $35,000 - $8,000). This is a
loss of $18,000 and the following entry would be made:
April 18
Cash
42,000
Accumulated Amort. Equip.
8,000
Loss on Realization
18,000
Accounts Receivable
15,000
Inventory
18,000
Equipment
35,000
To record the realization of non-cash assets
2.
April 18
3.
April 23
4.
R. Aube, Capital
9,000
P. Chordia, Capital
6,000
W. Elliott, Capital
3,000
Loss on Realization
18,000
To allocate gain to partners capital accounts
Notes Payable
15,000
Accounts Payable
16,000
Cash
To record payment of partnership liabilities.
31,000
After the entries in the first three steps are posted the only accounts that will
have balances are the cash and capital accounts. W. Elliott, Capital has a
deficiency of $1,800 (1200 CR 3000 DR = 1,800 DR). The other capital
accounts have a CR balance. W. Elliott owes the partnership $1,800. He
can either pay the deficiency or the other partners must absorb the loss.
April 24
Cash
1,800
W. Elliott, Capital
1,800
To record payment of capital deficiency of Elliott.
6.
April 25
After this is posted, all of the accounts will have a zero balance.
NONPAYMENT OF DEFICIENCY
5.
Elliott is unable to pay the $1,800 to the partnership so the other partners
must absorb the loss. The loss is allocated on the basis of their income
ratios.
April 24
6.
1,800
The cash balance of $16,000 (5,000 + 42,000 31,000) is now equal to the
other two partners capital accounts. It can now be distributed to them on
April 25.
April 25
After this is posted, all of the accounts will have a zero balance.