【正文】 OE Cash 5000 Notes payable 15000 acc rec 15000 A/C payable 16000 inventory 18000 Adam 15000 equipment 35000 Carey 17800 acc depre (8000) East 1200 65000 65000 Profit sharing ratio 3:2:1 An example of Liquidation of Partnership ? Under no capital deficiency (P. 550) 1. Sell all non cash assets for $75,000 Enter the difference of $15,000 into an realisation account 2. Distribute the realisation to all partner according to profit ratio 3. Pay off all liabilities with cash 4. Work out the capital account of each partners and distribute remaining cash to the partners Done Liquidation (cont.) ? Under capital deficiency (P. 551 552) (let’s assume the non cash assets can only be sold for $42020) 1. Sell all non cash assets for $42,000 Enter the difference of $18,000 into an realisation account on debit balance 2. Distribute the realisation to all partner according to profit ratio 3. Pay off all liabilities with cash 4. Work out the capital account of each partners and distribute cash to the Adam and Carey only. East got a debit bal in his capital and he is required to contribute a sum of $1800 to the Partners Liquidation (cont.) ? Under capital deficiency (P. 553) (let’s assume the non cash assets can only be sold for $42020 and non payment of deficiency occur) 1. Sell all non cash assets for $42,000 Enter the difference of $18,000 into an realisation account on debit balance 2. Distribute the realisation to all partner according to profit ratio 3. Pay off all liabilities with cash 4. Work out the capital account of each partners 5. As East is unable to pay the $1800, this amount would be bear by Adam and Carey in the ratio of 46% to 54% (15000:17800) Liquidation (cont.) 64 Suggested questions to ensure your lecture understanding Chapter 13: ? Questions 5,14,15,19 ? , , ? , , , ? , , ? , 。 = $1500 White $3000 x 189。 = $3000 White $6000 x 189。 allocate gain to partners) Payment from partnership assets continued ? Statement of financial position after adjusting entries: ? Three accounting possibilities: 1 Withdrawal at carrying amount of the partner’s owners equity 2 Bonus to retiring partner 3 Bonus to remaining partners PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 50 Cash $ 22 000 Total Liabilities $ 55 000 Inventory 27 000 Wu, Capital 40 000 Equipment 25 000 White, Capital 29 000 Less Accum. Depn 5 000 20 000 Williams, Capital 19 000 Land 74 000 . Total Assets $143 000 Total liab. amp。 equity $131 000 Payment from partnership assets continued – Valuer assesses ? inventory at $27 000 ? land at $74 000 – Adjusting entries PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 49 Wu, Current ($3000 x 1/3) 1 000 White, Current ($3000 x 1/3) 1 000 Williams, Current ($3000 x 1/3) 1 000 Inventory 3 000 (Revalue inventory amp。 Sons Australia, Ltd PARTNERSHIP FORM OF ENTITY ? The Partnership Act regulates practice ? Each State has its own Act ? A partnership is defined as … – an association between 2 or more persons – carrying on a business in mon – with a view to making a profit PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 2 LO1 Characteristics of partnerships 1. Association of individuals – Voluntary association – May be based on handshake or written agreement – Partnership not a legal entity, so is not taxed – Individual partners pay tax on their share of profit PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 3 Characteristics of partnerships continued 2. Mutual agency – Each partner acts on behalf of the partnership when engaging in partnership business – Act of any partner is binding on all other partners 3. Limited life – May be ended voluntarily at any time through the acceptance of anew partner or withdrawal of a partner – May be ended by involuntarily by death or incapacity of a partner PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 4 Characteristics of partnerships continued 4. Unlimited liability – Each partner is personally and individually liable for all partnership liabilities 5. Coownership of property – Partnership assets are owned jointly by the partners – If partnership is dissolved, assets do not legally revert to original contributor – Partners have a claim on total assets equal to the balance in individual capital account – Partnership profit or loss is coowned PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 5 PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 6 Entities with partnership characteristics ? In a limited partnership – one or more partners have unlimited liability, and – one or more partners have limited liability for the debts of the firm ? General partners have unlimited liability ? Limited partners have limited liability ? An incorporated limited partnership is a primarily used when e