Question

the following information applies to the questions displayed below. the field, brown & snow are partners and share income and losses equally. the partner decide to liquidate the partnership when their capital balances are as follows: field, $131,900; brown, $166,200; and snow, $154,500. on may 31, the liquidation resulted in a loss of $405,900. qs 12 - 13 (algo) part 3 3. assume that the partner with a deficit does not reimburse the partnership. prepare journal entries (a) to transfer the deficit to the other partners and (b) to record the final disbursement of cash to the partners. view transaction list journal entry worksheet 1 2 record transfer of fields deficit to the other partners. note: enter debits before credits. transaction general journal debit credit (a)

Explanation:

Step1: Calculate total capital before liquidation

$131900 + 166200+154500=\$452600$

Step2: Calculate Field's deficit

Total loss is $405900$. Since they share losses equally ($\frac{1}{3}$ each), loss allocated to Field is $\frac{405900}{3}=\$135300$. Field's capital is $131900$, so deficit = $135300 - 131900=\$3400$

Step3: Allocate Field's deficit to Brown and Snow

Since they share equally, each of Brown and Snow will absorb $\frac{3400}{2}=\$1700$

Journal entry (a) - Transfer deficit

Debit Brown's Capital: $1700$
Debit Snow's Capital: $1700$
Credit Field's Capital: $3400$

Journal entry (b) - Final disbursement

Brown's new - capital = $166200-1700=\$164500$
Snow's new - capital = $154500 - 1700=\$152800$
Debit Brown's Capital: $164500$
Debit Snow's Capital: $152800$
Credit Cash: $164500 + 152800=\$317300$

Answer:

Journal entry (a):

General Journal	Debit	Credit
Snow's Capital	$1700$
Field's Capital		$3400$

Journal entry (b):

General Journal	Debit	Credit
Snow's Capital	$152800$
Cash		$317300$