UNITY UNIVERSITY
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………………… 275,000 Total…………. 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 Value Proceed 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
Cash X Capital (4) Y Capital (2) Z Capital(4)
Capital Balance 65,000 45,000 35,000 (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
