Inventory sold for $600,000:
Gross gain on sale of inventory: $600,000 - $537,200 = $62,800
Allocation of gain/loss:
Kendra: (3/6) * $62,800 = $31,400 credit
Cogley: (2/6) * $62,800 = $20,933.33 credit
Mei: (1/6) * $62,800 = $10,466.67 credit
Journal entries:
1. To record the sale of inventory:
Cash $600,000
Inventory $537,200
Gain on sale of inventory $62,800
2. To allocate the gain on the sale of inventory:
Kendra, Capital $31,400
Cogley, Capital $20,933.33
Mei, Capital $10,466.67
Inventory sold for $500,000:
Gross loss on sale of inventory: $500,000 - $537,200 = -$37,200
Allocation of gain/loss:
Kendra: (3/6) * -$37,200 = -$18,600 debit
Cogley: (2/6) * -$37,200 = -$12,400 debit
Mei: (1/6) * -$37,200 = -$6,200 debit
Journal entries:
1. To record the sale of inventory:
Cash $500,000
Inventory $537,200
Loss on sale of inventory $-37,200
2. To allocate the loss on the sale of inventory:
Kendra, Capital $-18,600
Cogley, Capital $-12,400
Mei, Capital $-6,200
Inventory sold for $320,000 and partners with deficits pay their deficits in cash:
Gross gain on sale of inventory: $320,000 - $537,200 = -$217,200
Allocation of gain/loss:
Kendra: (3/6) * -$217,200 = -$108,600 debit
Cogley: (2/6) * -$217,200 = -$72,400 debit
Mei: (1/6) * -$217,200 = -$36,200 debit
Journal entries:
1. To record the sale of inventory:
Cash $320,000
Inventory $537,200
Loss on sale of inventory $-217,200
2. To allocate the loss on the sale of inventory:
Kendra, Capital $-108,600
Cogley, Capital $-72,400
Mei, Capital $-36,200
3. To record the payment of partners' deficits:
Kendra, Capital $108,600
Cogley, Capital $72,400
Mei, Capital $36,200
Cash $217,200
Inventory sold for $250,000 and partners with deficits do not pay their deficits:
Gross loss on sale of inventory: $250,000 - $537,200 = -$287,200
Allocation of gain/loss:
Kendra: (3/6) * -$287,200 = -$143,600 debit
Cogley: (2/6) * -$287,200 = -$95,733.33 debit
Mei: (1/6) * -$287,200 = -$47,866.67 debit
Journal entries:
1. To record the sale of inventory:
Cash $250,000
Inventory $537,200
Loss on sale of inventory $-287,200
2. To allocate the loss on the sale of inventory:
Kendra, Capital $-143,600
Cogley, Capital $-95,733.33
Mei, Capital $-47,866.67
Endra, Cogley, and Mei share income and loss in a 3:2:1 ratio (in ratio form: Kendra, 3/6; Cogley, 2/6; and Mei, 1/6). The partners have decided to liquidate their partnership. On the day of liquidation, their balance sheet appears as follows.
Balance Sheet
Assets Liabilities
Cash $ 180,800 Accounts payable $ 245,500
Inventory 537,200 Equity
Kendra, Capital 93,000
Cogley, Capital 212,500
Mei, Capital 167,000
Total assets $ 718,000 Total liabilities and equity $ 718,000
Required:
For each of the following scenarios, complete the schedule allocating the gain or loss on the sale of inventory. Prepare journal entries to record the below transactions.
Note: Do not round intermediate calculations. Enter losses and partner deficits, if any, as negative amounts.
Inventory is sold for $600,000.
Inventory is sold for $500,000.
Inventory is sold for $320,000 and partners with deficits pay their deficits in cash.
Inventory is sold for $250,000 and partners with deficits do not pay their deficits.
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