Chapter 05, Partnership, termination and liquidation

Chapter 05 Partnership termination and liquidation

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Unformatted text preview: Prepare the entry. Prepare the entry. Page 24 Deficit Capital Balance Example With a 40% share of the $50,000 With a 40% share of the $50,000 lloss, Gill’s capital account oss, Gill’s capital account moves to a deficit balance of moves to a deficit balance of $(15,000). $(15,000). Page 25 Deficit Capital Balance Example The $25,000 ffor the inventory sale, The $25,000 or the inventory sale, iincreases the cash balance to $55,000. ncreases the cash balance to $55,000. $35,000 must be kept to pay off the $35,000 must be kept to pay off the accounts payable. accounts payable. How will the How will the rremaining emaining $20,000 be $20,000 be distributed? distributed? Page 26 Deficit Capital Balance Example Notice that, after Gill’s deficit has been allocated on Notice that, after Gill’s deficit has been allocated on tthe basis of 35:25, there is now a deficit balance in he basis of 35:25, there is now a deficit balance in Finn’s account! Finn’s account! Page 27 Deficit Capital Balance Example After allocating Finn’s deficit to Scales, the $20,000 can After allocating Finn’s defic...
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This document was uploaded on 03/25/2014.

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