The following events pertain to a partnership formed by Mark Raymond and Stan Bryden to operate a floor-cleaning company:
Feb 14 The partnership was formed. Raymond transferred to the partnership $80.000 cash, land worth $800,000, a building worth $480,000, and a mortgage on the building of $240,000. Bryden transferred to the partnership $40,000 cash and equipment worth $160,000.
Dec. 31 During 2011, the partnership earned income of just $84,000. The partnership agreement specifics that income and losses are to be divided by paying salaries of $40000 to Raymond and $60,000 to Bryden, allowing 8 percent interest on beginning capital investment, and dividing any remainder equally.
Jan 1 To improve the prospects for the company, the partners decided to take in a new partner, Chuck Menzer, who had experience in the floor-cleaning business. Menzer invested $156,000 for a 25 percent interest in the business. A bonus was transferred in equal amounts from the original partners’ Capital accounts to Menzer’s Capital account.
Dec. 31 During 2012, the company earned income of $87,200. The new partnership agreement specified that income and losses would be divided by paying salaries of $60,000 to Bryden and $80,000 to Menzer (no salary to Raymond), allowing 8 percent interest on beginning capital balances after Menzer’s admission, and dividing the remainder equally.
Jan 1 Because it appeared that the business could not support the three partners, the partners decided to liquidate the partnership. The asset and liability accounts of the partnership were as follows: Cash, $407,200; Accounts Receivable (net), $68,000; Land, $80,000; Building (net), $448,000; Equipment (net), $236,000; Accounts Payable, $88,000; and Mortgage Payable, $224,000. The equipment was sold for $200,000. The accounts payable were paid. The loss was distributed equally to the partners’ Capital accounts. A statement of liquidation was prepared, and the remaining assets and liquidation were distributed. Raymond agreed to accept cash plus the land and building at book value and the mortgage payable as payments for his share. Bryden accepted cash and the accounts receivable for his share. Menzer was paid in cash.
Prepare entries in journal form record all of the faces above. Support your computations with schedules, and prepare a statement of liquation in connection with January 1, 2013, entries.