Chapter 12

Partnerships

Accounting, 22st Edition

Warren Reeve Fess

© Copyright 2004 South-Western, a division

PowerPoint Presentation by Douglas Cloud
Professor Emeritus of Accounting
Pepperdine University
of Thomson Learning. All rights reserved.
Task Force Image Gallery clip art included in this
electronic presentation is used with the permission of
NVTech Inc.
 Objectives
Objectives
1. Menjelaskan Karakteristik perusahaan
PeroranganSetelah
danmempelajari
Setelah Persekutuan
mempelajari
2. MenjelaskanBab ini
ini Mahasiswa
Bab Struktur statement of
Mahasiswa
Partnership Equity dapat:
diharapkan
diharapkan dapat:
3. Memahami Akuntansi Partnership yg
meliputi:
 Forming
 Dividing Income
 Partnership Dissolution
 Liquidating
 Alternative
Alternative Forms
Forms of
of Business
Business Entities
Entities
Advantages
A
A proprietorship
proprietorship isis • Mudah dibentuk
owned
owned by
by one
one • Biaya Pendiriannya
individual.
individual. murah
Disadvantages
Joe’s • Modal Kecil
• Unlimited
liability/Kewajiban
tak terbatas
Review
Reviewof
of Chapter
Chapter 11
 Alternative
Alternative Forms
Forms of
of Business
Business Entities
Entities
A Advantages
A corporation
corporation isis
organized • The ability to obtain large
organized underunder amounts of resources by
state
state or
or federal
federal issuing stocks
statutes
statutes asas aa separate
separate • Limited liability for the
legal
legal entity.
entity. owners
J & M, Inc.
Disadvantages
• Double taxation
• More complexity
and regulations
Alternative
Alternative Forms
Forms of
of Business
Business Entities
Entities

AA business
business may may organize
organize
as
as an
an SS Corporation.
Corporation. The The
J & M, Inc. IRS
IRS allows
allows income
income toto pass
pass
through
through the the SS Corporation
Corporation
to
to the
the individual
individual
stockholder
stockholder without
without the
the
corporation
corporation having
having toto pay
pay
tax
tax onon the
the income.
income.
Alternative
Alternative Forms
Forms of
of Business
Business Entities
Entities
AA partnership
partnership isis an
an
association
association of
of two
two Advantages
or
or more
more individuals.
individuals. • Modal lbh besar
daripada Per
Perorangan.
Joe and Marty’s
• Keahlian
Manajemennya lbh
bagus
 Alternative
Alternative Forms
Forms of
of Business
Business Entities
Entities
AA partnership
partnership isis an
an
association
association of
of two
two Disadvantages
or
or more
more individuals.
individuals. • Limited life
• Unlimited liability
• Co-ownership of
Joe and Marty’s
partnership property
• Mutual agency
Alternative
Alternative Forms
Forms of
of Business
Business Entities
Entities

AA partnership
partnership isis created
created
by
by aa contract,
contract, known
known asas
the
the partnership
partnership
agreement
agreement or or articles
articles of
of
partnership.
partnership.
Alternative
Alternative Forms
Forms of
of Business
Business Entities
Entities

AA variant
variant of of the
the
regular
regular partnership
partnership
isis aa limited
limited
partnership.
partnership. This This form
form of
of partnership
partnership
allows
allows partners
partners that
that are
are
not
not involved
involved inin the
the
operations
operations of of the
the
partnership
partnership to to retain
retain
limited
limited liability.
liability.
 Limited
Limited Liability
Liability Corporations
Corporations
 Combines the advantages of the corporate and
partnership forms.
 Owners are termed “members” rather than
“partners.”
 Members must create an operating agreement.
 LLC may elect to be treated as a partnership
for tax purposes.
Continued
Continued
 Limited
Limited Liability
Liability Corporations
Corporations
 Unless specified in the operating agreement,
LLCs have a limited life.
 Members may elect operating the LLC as a
“member managed” entity.
 LLC provides limited liability for the members.
 LLCs must file “articles of organization” with
state governmental authorities.
 Comparison
Comparison of
of Alternate
Alternate
Entity
Entity Characteristics
Characteristics
Ease
Ease of
of Formation
Formation
Proprietorship Simple
Corporation Complex
Partnership Simple
LLC Moderate
 Comparison
Comparison of
of Alternate
Alternate
Entity
Entity Characteristics
Characteristics
Legal
Legal Liability
Liability
Proprietorship No limitation
Corporation Limited liability
Partnership No limitation
LLC Limited liability
 Comparison
Comparison of
of Alternate
Alternate
Entity
Entity Characteristics
Characteristics
Limitation
Limitation on
on Life
Life of
of Entity
Entity
Proprietorship Yes
Corporation No
Partnership Yes
LLC Yes
 Comparison
Comparison of
of Alternate
Alternate
Entity
Entity Characteristics
Characteristics
Ease
Ease of
of Raising
Raising Capital
Capital
Proprietorship Difficult
Corporation Easier
Partnership Moderate
LLC Moderate
 Equity
Equity Reporting
Reporting for
for
Alternative
Alternative Entity
Entity Forms
Forms
Proprietorships
Proprietorships
 Proprietorships use a capital account to
record investments by the owner of the
business.
 Withdrawals by the owner are recorded
in the owner’s drawing account.
 Equity
Equity Reporting
Reporting for
for
Alternative
Alternative Entity
Entity Forms
Forms
Proprietorships
Proprietorships
Greene Landscapes
Statement of Owner’s Equity
For the year ended December 31, 2006
Duncan Greene, capital, Dec. 31, 2005 $345,000
Net income $79,000
Less withdrawals 35,000
Increase in owner’s equity 44,000
Duncan Greene, capital, Dec. 31, 2006 $389,000
 Equity
Equity Reporting
Reporting for
for
Alternative
Alternative Entity
Entity Forms
Forms
Corporations
Corporations
 Investments by stockholders in the
business use capital stock accounts,
such as Common Stock and Preferred
Stock.
 Dividends to owners (stockholders) are
recorded by a debit to Retained
Earnings.
 Equity
Equity Reporting
Reporting for
for
Alternative
Alternative Entity
Entity Forms
Forms
Corporations
Corporations
 Equity
Equity Reporting
Reporting for
for
Alternative
Alternative Entity
Entity Forms
Forms
Partnerships
Partnerships and
and Limited
Limited Liability
Liability Corporations
Corporations
 Setoran Modal dan Withdrawal dicatat
terpisah antar Partner
 Limited liability corporations are similar
to a partnership except that each owner is
referred to as “member.”
Equity
Equity Reporting
Reporting for
for Alternative
Alternative
Entity
Entity Forms
Forms
Partnerships
Partnerships
 Forming
Forming aa Partnership
Partnership
Joseph
Joseph Stevens
Stevens and
and Earl
Earl Foster
Foster agree
agree to
to combine
combine
their
their hardware
hardware businesses
businesses inin aa partnership.
partnership. They
They
agree
agree that
that the
the partnership
partnership isis to
to assume
assume the
the
liabilities
liabilities of
of the
the separate
separate businesses.
businesses.
Stevens’ Transfer of Assets, Liability, and Equity
Apr. 1 Cash 7 200 00
Accounts Receivable 16 300 00
Merchandise Inventory 28 700 00
Store Equipment 5 400 00
Office Equipment 1 500 00
Allowance for Doubtful Accounts 1 500 00
Accounts Payable 2 600 00
Joseph Stevens, Capital 55 000 00
Forming
Forming aa Partnership
Partnership
A
A similar
similar entry
entry would
would be be made
made
for
for the
the assets,
assets, liabilities,
liabilities, and
and
equity
equity of
of Earl
Earl Foster.
Foster.
 Forming
Forming aa Partnership
Partnership
Assume
Assume that
that instead
instead of
of forming
forming aa partnership,
partnership,the
the
two
two men
men formed
formed aa limited
limited liability
liability corporation.
corporation.

Stevens’ Transfer of Assets, Liability, and Equity

Apr. 1 Cash 7 200 00

Accounts Receivable 16 300 00
Merchandise Inventory 28 700 00
Store Equipment 5 400 00
Office Equipment 1 500 00
Allowance for Doubtful Accounts 1 500 00
Accounts Payable 2 600 00
Joseph Stevens, Member Equity 55 000 00
 Dividing
Dividing Income
Income
Services
Services of
of Partners
Partners
Formula
Formula pembagian
pembagian Laba-rugi
Laba-rugi Partnership
Partnership dari
dari Stone
Stone
dan
dan Mills
Mills adalah
adalah sbb:
sbb: 1. 1. Annual
Annual salary
salary allowance
allowance of of
$30,000
$30,000 to
to Tn
Tn A A and
and Tn
Tn BB isis to
to receive
receive $24,000.
$24,000. 2. 2. Any
Any
net
net income
income isis to
to be
be divided
divided equally.
equally.
Apabila
Apabila diketahui
diketahui Net
Net Income
Income th
th berjalan
berjalan $75,000.
$75,000.
J. Stone C. Mills Total
Salary allowance $30,000 $24,000 $54,000
Remaining income 10,500 10,500 21,000
Division of net income $40,500 $34,500 $75,000
 Dividing
Dividing Income
Income
Services
Services of
of Partners
Partners

Dec. 31 Income Summary 75 000 00

Jennifer Stone, Capital 40 500 00
Crystal Mills, Capital 34 500 00
 Dividing
Dividing Income
Income
LLC
LLC Alternative
Alternative

Dec. 31 Income Summary 75 000 00

Jennifer Stone, Member Equity 40 500 00
Crystal Mills, Member Equity 34 500 00
 Dividing
Dividing Income
Income
Services
Services of
of Partners
Partners
Formula
Formula pembagian
pembagian Laba-rugi
Laba-rugi Partnership
Partnership dari
dari Tn
Tn
Stone
Stone dan
dan Mills
Mills adalah
adalah sbb:
sbb:
1.
1.Annual
Annual salary
salary allowance
allowance of of $30,000
$30,000 Tn
Tn Stone
Stone
and
and Tn
Tn Mills
Mills to
to receive
receive $24,000.
$24,000.
2.
2.Diberikan
Diberikan bunga
bunga 12%
12% atas
atas Saldo
Saldo Modal
Modal masing2
masing2
3.
3.Sisa
Sisa Lebih/Kurang
Lebih/Kurang dibagi
dibagi sama
sama rata
rata
Apabila
Apabila diketahui
diketahui Net
Net Income
Income th
th berjalan
berjalan $75,000.
$75,000.
 Dividing
Dividing Income
Income
Services
Services of
of Partners
Partners and
and Investments
Investments
J. Stone C. Mills Total
Salary allowance $30,000 $24,000 $54,000
Interest allowance 9,600 7,200 16,800
Remaining income 2,100 2,100 4,200
Division of net income $41,700
$80,000 x $33,300
$80,000 x $60,000 $75,000
$60,000 xx
12%
12% 12%
12%
 Dividing
Dividing Income
Income
Services
Services of
of Partners
Partners

Dec. 31 Income Summary 75 000 00

Jennifer Stone, Capital 41 700 00
Crystal Mills, Capital 33 300 00
 Dividing
Dividing Income
Income
LLC
LLC Alternative
Alternative

Dec. 31 Income Summary 75 000 00

Jennifer Stone, Member Equity 41 700 00
Crystal Mills, Member Equity 33 300 00
 Dividing
Dividing Income
Income
Allowances
Allowances Exceed
Exceed Net
Net Income
Income
Assume
Assume the
the same
same facts
facts asas before
before except
except that
that
the
the net
net income
income isis only
only $50,000.
$50,000.
J. Stone C. Mills Total
Salary allowance $30,000 $24,000 $54,000
Interest allowance 9,600 7,200 16,800
Total $39,600 $31,200 $70,800
Deduct excess equally 10,400 10,400 20,800
Division of net income $29,200 $20,800 $50,000
 Dividing
Dividing Income
Income
Services
Services of
of Partners
Partners

Dec. 31 Income Summary 50 000 00

Jennifer Stone, Capital 29 200 00
Crystal Mills, Capital 20 800 00
 Dividing
Dividing Income
Income
Allowances
Allowances Exceed
Exceed Net
Net Income
Income
Assume
Assume the
the same
same facts
facts as
as before
before except
except that
that
the
the net
net LOSS
LOSS isis $10,000.
$10,000.
J. Stone C. Mills Total
Salary allowance $30,000 $24,000 $54,000
Interest allowance 9,600 7,200 16,800
Total $39,600 $31,200 $70,800
Deduct excess equally 40,400 40,400 80,800
Division of net income ($800) ($9,200) ($10,000)
 Dividing
Dividing Income
Income
Services
Services of
of Partners
Partners
Dec. 31 Jennifer Stone, Capital 800
Crystal Mills, Capital 9 200
Income Summary 10 000
 Partnership
Partnership Dissolution
Dissolution
Dissolution
Dissolution terjadi
terjadi apabila
apabila ada
ada perubahan
perubahan
anggota
anggota Partners.
Partners. Masuknya
Masuknya partner
partner baru
baru atau
atau
keluarnya
keluarnya partner
partner lama
lama

Sebelum
Sebelum dissolution
dissolution perusahaan
perusahaan harus
harus
melakukan
melakukan Revaluasi
Revaluasi atas
atas assetnya
assetnya

Revaluasi
Revaluasi adalah
adalah menilai
menilai kembali
kembali seluruh
seluruh
assetnya
assetnya berdasar
berdasar nilai
nilai wajar
wajar pada
pada saat
saat itu
itu
 Partnership
Partnership Dissolution
Dissolution
Revaluation
Revaluation of
of Assets
Assets

Partners
Partners Donald
Donald Lewis
Lewis and
and Gerald
Gerald Morton
Morton
mempunyai
mempunyai saldo
saldo modal
modal masing-masing
masing-masing
$35,000
$35,000 and
and $25,000.
$25,000.
Hasil
Hasil revaluasi
revaluasi terdapat
terdapat kenaikan
kenaikan nilai
nilai
atas
atas Merchandise
Merchandise Inventory
Inventory dari
dari $14,000
$14,000
menjadi
menjadi $17,000.
$17,000.
Laba-Rugi
Laba-Rugi dibagi
dibagi sama
sama rata
rata
 Partnership
Partnership Dissolution
Dissolution
Revaluation
Revaluation of
of Assets
Assets
June 1 Merchandise Inventory 3 000 00
Donald Lewis, Capital 1 500 00
Gerald Morton, Capital 1 500 00
 Partnership
Partnership Dissolution
Dissolution
Admitting
Admitting aa Partner
Partner
Masuknya Anggota baru dalam Partnership
ada dua cara:
1. Purchasing an interest from one or more of
the current partners.
Membeli kepemilikan modal dari partner
yang lama.
2. Contributing assets to the partnership.
Menyetor asset ke perusahaan
 Partnership
Partnership Dissolution
Dissolution
Purchasing
Purchasing an
an Interest
Interest in
in aa Partnership
Partnership

Partners
Partners Andrews
Andrews and
and Bell
Bell mempunyai
mempunyai
saldo
saldo modal
modal masing2
masing2 $50,000.
$50,000. tgl
tgl 11 June
June
Joe
Joe bergabung
bergabung dengan
dengan membeli
membeli 1/51/5
kepemilikan
kepemilikan Modal
Modal masing2
masing2 partner
partner lama.
lama.
 Partnership
Partnership Dissolution
Dissolution
Purchasing
Purchasing an
an Interest
Interest in
in aa Partnership
Partnership

June 1 Tom Andrews, Capital 10 000 00

Nathan Bell, Capital 10 000 00
Joe Canter, Capital 20 000 00

For
For aa LLC,
LLC, members’
members’ equity
equity accounts
accounts would
would
have
have been
been used
used rather
rather than
than capital
capital accounts.
accounts.
 Partnership
Partnership Dissolution
Dissolution
Contributing
Contributing Assets
Assets to
to aa Partnership
Partnership

Partners
Partners Donald
Donald Lewis
Lewis and
and Gerald
Gerald Morton
Morton
mempunyai
mempunyai saldo
saldo modal
modal masing2
masing2 $35,000
$35,000
and
and $25,000.
$25,000. On
On June
June 1,
1, Sharon
Sharon Nelson
Nelson
bergabung
bergabung ke
ke partnership
partnership dengan
dengan
menyetor
menyetor kas
kas $20,000
$20,000
 Partnership
Partnership Dissolution
Dissolution
Contributing
Contributing Assets
Assets to
to aa Partnership
Partnership
June 1 Cash 20 000 00
Sharon Nelson, Capital 20 000 00

For
For aa LLC,
LLC, Sharon
Sharon Nelson,
Nelson, Member
Member Equity
Equity
would
would have
have been
been credited.
credited.
 Partnership
Partnership Dissolution
Dissolution
Partner
Partner Bonuses
Bonuses

On
On March
March 1, 1, partnership
partnership milik
milik Marsha
Marsha
Jenkins
Jenkins dan
dan Helen
Helen Kramer
Kramer admit
admit Alex
Alex
Diaz
Diaz as
as aa new
new partner.
partner. Setelah
Setelah revaluasi
revaluasi
saldo
saldo modal
modal dari
dari masing2
masing2 partner
partner adalah
adalah
$20,000
$20,000 and
and $24,000.
$24,000.
 Partnership
Partnership Dissolution
Dissolution
Partner
Partner Bonuses
Bonuses

Jenkins
Jenkins and
and Kramer
Kramer setuju
setuju Diaz
Diaz masuk
masuk
menjadi
menjadi Partner
Partner baru
baru dengan
dengan menyetor
menyetor
Cash
Cash $31,000.
$31,000. Diaz
Diaz akan
akan memperoleh
memperoleh 1/3
1/3
kepemilikan
kepemilikan Modal
Modal partnership
partnership yang
yang baru.
baru.
 Partnership
Partnership Dissolution
Dissolution
Partner
Partner Bonuses
Bonuses from
from New
New Partner
Partner
Equity of Jenkins $20,000
Equity of Kramer 24,000
Diaz’s Contribution 31,000
Total equity after admitting Diaz $75,000
Diaz’s interest (1/3 x $75,000) $25,000

Diaz’s contribution $31,000

Diaz’s equity after admission 25,000
Bonus paid to Jenkins and Kramer $ 6,000
 Partnership
Partnership Dissolution
Dissolution
Partner
Partner Bonuses
Bonuses
Mar. 1 Cash 31 000 00
Alex Diaz, Capital 25 000 00
Marsha Jenkins, Capital 3 000 00
Helen Kramer, Capital 3 000 00

$6000 ÷ 2
 Partnership
Partnership Dissolution
Dissolution
Partner
Partner Bonuses
Bonuses
Setelah
Setelah revaluasi
revaluasi saldo
saldo modal
modal Janice
Janice
Cowen
Cowen adl
adl $80,000
$80,000 dan
dan Steve
Steve Dodd
Dodd
sebesar
sebesar $40,000.
$40,000. Ellen
Ellen Chua
Chua masuk
masuk
menjadi
menjadi partner
partner baru
baru dengan
dengan menyetor
menyetor kas
kas
$30,000
$30,000 untuk
untuk memperoleh
memperoleh ¼ ¼
Kepemilikan
Kepemilikan modal
modal partnership.
partnership.
Pembagian
Pembagian laba-rugi
laba-rugi antara
antara Cowen
Cowen andand
Dodd
Dodd adalah
adalah dengan
dengan ratio
ratio 2:1
2:1
 Partnership
Partnership Dissolution
Dissolution
Partner
Partner Bonuses
Bonuses to
to New
New Partner
Partner
Equity of Cowen $ 80,000
Equity of Dodd 40,000
Chua’s Contribution 30,000
Total equity after admitting Chua $150,000
Chua’s interest (1/4 x $150,000) $ 37,500

Chua’s contribution $30,000

Chua’s equity after admission 37,500
Bonus paid to Chua $ 7,500
 Partnership
Partnership Dissolution
Dissolution
Partner
Partner Bonuses
Bonuses
Mar. 1 Cash 2/3 x 30 000 00
Janice Cowen, Capital $7,50
1/3 x 5 000 00
Steve Dodd, Capital 0
$7,50 2 500 00
Ellen Chua, Capital 0 37 500 00
Liquidating
Liquidating Partnerships
Partnerships
When
When aa partnership
partnership goes
goes out
out of
of
business,
business, thethe winding-up
winding-up
process
process isis called
called the
the liquidation
liquidation
of
of aa partnership.
partnership.
Langkah2
Langkah2 proses
proses Likuidasi
Likuidasi
1.Realisasi
1.Realisasi Non
Non Cash
Cash Asset
Asset
2.Pembagian
2.Pembagian Laba/Rugi
Laba/Rugi
Realisasi
Realisasi
3.Pelunasan
3.Pelunasan Hutang
Hutang
4.Pembagian
4.Pembagian Sisa
Sisa Kas
Kas
kepada
kepada Partner
Partner
 Liquidating
Liquidating Partnerships
Partnerships
Farley,
Farley, Greene,
Greene, andand Hall
Hall share
share income
income and
and losses
losses in
in
aa ratio
ratio of
of 5:3:2.
5:3:2. On
On April
April 9,9, after
after discontinuing
discontinuing
operations,
operations, the
the firm
firm had
had the
the following
following trial
trial balance.
balance.
Cash $11,000
Noncash Assets 64,000
Liabilities $ 9,000
Jean Farley, Capital 22,000
Brad Greene, Capital 22,000
Alice Hall, Capital 22,000
Total $75,000 $75,000
 Liquidating
Liquidating Partnerships
Partnerships
Gain
Gain on
on Realization
Realization

Between
Between April
April 10
10 and
and April
April 30,
30, 2006,
2006,
Farley,
Farley, Greene,
Greene, and
and Hall
Hall sell
sell all
all
noncash
noncash assets
assets for
for $72,000.
$72,000.
 Liquidating
Liquidating Partnerships
Partnerships
Noncash
Cash Assets Liabilities
Balance before realization $11,000 $64,000 $9,000
Sale of assets and division
of gain +72,000 -64,000 —

Left side of statement

 Liquidating
Liquidating Partnerships
Partnerships
Farley Greene Hall
Capital Capital Capital
Balance before realization $22,000 $22,000 $22,000
Sale of assets and division
of gain +4,000 +2,400 +1,600

$8,000
$8,000 $8,000$8,000 $8,000
$8,000
gain
gain xx .50
.50 gain
gain xx .30
.30gain
gain xx .20
.20

Right side of statement

 Liquidating
Liquidating Partnerships
Partnerships
Noncash
Cash Assets Liabilities
Balance before realization$11,000 $64,000 $9,000
Sale of assets and division
of gain +72,000 –64,000 —
Balance after realization $83,000 $0 $9,000

Left side of statement

 Liquidating
Liquidating Partnerships
Partnerships
Farley Greene Hall
Capital Capital Capital
Balance before realization$22,000 $22,000 $22,000
Sale of assets and division
of gain +4,000 +2,400 +1,600
Balance after realization $26,000 $24,400 $23,600

Right side of statement

Liquidating
Liquidating Partnerships
Partnerships
Gain
Gain on
on Realization
Realization

The
The partnership’s
partnership’s liabilities
liabilities are
are
paid,
paid, $9,000.
$9,000.
 Liquidating
Liquidating Partnerships
Partnerships
Noncash
Cash Assets Liabilities
Balance before realization$11,000 $64,000 $9,000
Sale of assets and division
of gain +72,000 –64,000 —
Balance after realization $83,000 $ 0 $9,000
Payment of liabilities –9,000 — –9,000

Left side of statement

 Liquidating
Liquidating Partnerships
Partnerships
Noncash
Cash Assets Liabilities
Balance before realization$11,000 $64,000 $9,000
Sale of assets and division
of gain +72,000 –64,000 —
Balance after realization $83,000 $ 0 $9,000
Payment of liabilities –9,000 — –9,000
Balance after payment $74,000 $ 0 $ 0

Left side of statement

Liquidating
Liquidating Partnerships
Partnerships
Gain
Gain on
on Realization
Realization

The
The remaining
remaining cash,
cash, $74,000,
$74,000,
isis paid
paid to
to each
each partner
partner in
in
accordance
accordance with with the
the partner’s
partner’s
capital
capital balance.
balance.
 Liquidating
Liquidating Partnerships
Partnerships
Noncash
Cash Assets Liabilities
Balance before realization $11,000 $64,000 $9,000
Sale of assets and division
of gain +72,000 –64,000 —
Balance after realization $83,000 $ 0 $9,000
Payment of liabilities –9,000 — –9,000
Balance after payment $74,000 $ 0 $ 0
Partners’ cash distributed –74,000 — —
Final balances $ 0 $ 0 $ 0
Left side of statement
 Liquidating
Liquidating Partnerships
Partnerships
Farley Greene Hall
Capital Capital Capital
Balance before realization$22,000 $22,000 $22,000
Sale of assets and division
of gain +4,000 +2,400 +1,600
Balance after realization $26,000 $24,400 $23,600
Payment of liabilities — — —
Balance after payment $26,000 $24,400 $23,600
Partners’ cash distributed –26,000 –24,400 –23,600
Final balances $ 0 $ 0 $ 0
Right side of statement
 Liquidating
Liquidating Partnerships
Partnerships
Sale
Saleof
of Assets
Assets

Apr. 30 Cash 72 000 00

Noncash Assets 64 000 00
Gain on Realization 8 000 00
 Liquidating
Liquidating Partnerships
Partnerships
Division
Division of
of Gain
Gain

Apr. 30 Gain on Realization 8 000 00

Jean Farley, Capital 4 000 00
Brad Greene, Capital 2 400 00
Alice Hall, Capital 1 600 00
 Liquidating
Liquidating Partnerships
Partnerships
Payment
Payment of
of Liabilities
Liabilities

Apr. 30 Liabilities 9 000 00

Cash 9 000 00
 Liquidating
Liquidating Partnerships
Partnerships
Distribution
Distribution of
of Cash
Cash to
to Partners
Partners

Apr. 30 Jean Farley, Capital 26 000 00

Brad Greene, Capital 24 400 00
Alice Hall, Capital 23 600 00
Cash 74 000 00
 Liquidating
Liquidating Partnerships
Partnerships
Loss
Loss on
on Realization
Realization

Between
Between April
April 10
10 and
and April
April 30,
30, 2006,
2006,
Farley,
Farley, Greene,
Greene, and
and Hall
Hall sell
sell all
all
noncash
noncash assets
assets for
for $44,000.
$44,000.
 Liquidating
Liquidating Partnerships
Partnerships
Noncash
Cash Assets Liabilities
Balance before realization$11,000 $64,000 $9,000
Sale of assets and division
of loss +44,000 –64,000 —

Left side of statement

 Liquidating
Liquidating Partnerships
Partnerships
Farley Greene Hall
Capital Capital Capital
Balance before realization $22,000 $22,000 $22,000
Sale of assets and division
of loss –10,000 –6,000 –4,000

$20,000
$20,000 $20,000
$20,000 $20,000
$20,000
loss
loss xx .50
.50 loss
loss xx .30
.30 loss
loss xx .20
.20

Right side of statement

 Liquidating
Liquidating Partnerships
Partnerships
Noncash
Cash Assets Liabilities
Balance before realization$11,000 $64,000 $9,000
Sale of assets and division
of loss +44,000 –64,000 —
Balance after realization $55,000 $0 $9,000

Left side of statement

 Liquidating
Liquidating Partnerships
Partnerships
Farley Greene Hall
Capital Capital Capital
Balance before realization$22,000 $22,000 $22,000
Sale of assets and division
of loss –10,000 –6,000 –4,000
Balance after realization $12,000 $16,000 $18,000

Right side of statement

Liquidating
Liquidating Partnerships
Partnerships
Loss
Loss on
on Realization
Realization

The
The liabilities
liabilities of
of the
the
partnership
partnership are
are paid,
paid, $9,000.
$9,000.
 Liquidating
Liquidating Partnerships
Partnerships
Noncash
Cash Assets Liabilities
Balance before realization$11,000 $64,000 $9,000
Sale of assets and division
of loss +44,000 –64,000 —
Balance after realization $55,000 $ 0 $9,000
Payment of liabilities –9,000 — –9,000

Left side of statement

 Liquidating
Liquidating Partnerships
Partnerships
Noncash
Cash Assets Liabilities
Balance before realization$11,000 $64,000 $9,000
Sale of assets and division
of loss +44,000 –64,000 —
Balance after realization $55,000 $ 0 $9,000
Payment of liabilities –9,000 — –9,000
Balance after payment $46,000 $ 0 $ 0

Left side of statement

Liquidating
Liquidating Partnerships
Partnerships
Loss
Loss on
on Realization
Realization

The
The remaining
remaining cash,
cash, $46,000,
$46,000,
isis paid
paid to
to each
each partner
partner in
in
accordance
accordance with with the
the partner’s
partner’s
capital
capital balance.
balance.
 Liquidating
Liquidating Partnerships
Partnerships
Noncash
Cash Assets Liabilities
Balance before realization $11,000 $64,000 $9,000
Sale of assets and division
of loss +44,000 –64,000 —
Balance after realization $55,000 $ 0 $9,000
Payment of liabilities –9,000 — –9,000
Balance after payment $46,000 $ 0 $ 0
Partners’ cash distributed –46,000 — —
Final balances $ 0 $ 0 $ 0
Left side of statement
 Liquidating
Liquidating Partnerships
Partnerships
Farley Greene Hall
Capital Capital Capital
Balance before realization $22,000 $22,000 $22,000
Sale of assets and division
of loss –10,000 –6,000 –4,000
Balance after realization $12,000 $16,000 $18,000
Payment of liabilities — — —
Balance after payment $12,000 $16,000 $18,000
Partners’ cash distributed –12,000 –16,000 –18,000
Final balances $ 0 $ 0 $ 0
Right side of statement
 Liquidating
Liquidating Partnerships
Partnerships
Sale
Saleof
of Assets
Assets

Apr. 30 Cash 44 000 00

Loss on Realization 20 000 00
Noncash Assets 64 000 00
 Liquidating
Liquidating Partnerships
Partnerships
Division
Division of
of Loss
Loss

Apr. 30 Jean Farley, Capital 10 000 00

Brad Greene, Capital 6 000 00
Alice Hall, Capital 4 000 00
Loss on Realization 20 000 00
 Liquidating
Liquidating Partnerships
Partnerships
Payment
Payment of
of Liabilities
Liabilities

Apr. 30 Liabilities 9 000 00

Cash 9 000 00
 Liquidating
Liquidating Partnerships
Partnerships
Distribution
Distribution to
to Partners
Partners

Apr. 30 Jean Farley, Capital 12 000 00

Brad Greene, Capital 16 000 00
Alice Hall, Capital 18 000 00
Cash 46 000 00
 Lifecycle
Lifecycle of
of aa Business
Business
Business Stage Principal Advantage
Della’s Delights, Form easily: Jacobi forms a
Proprietorship business by obtaining a
local business license and
Jeff Jacobi, Proprietor opening a bank account.

Della’s Delights, Expand capital and

Partnership expertise: Jacobi admits a
Jacobi and Lange, new partner that contributes
Partners capital and expertise.
Continued
 Lifecycle
Lifecycle of
of aa Business
Business
Business Stage Principal Advantage

Della’s Delights, LLC Limit legal liability: The

partnership is changed to an
LLC to limit legal liability
of owners.
Della’s Delights, Inc. Simplify raising capital:
The LLC is changed to a
corporation to raise capital
Continued from the public.
 Lifecycle
Lifecycle of
of aa Business
Business
Business Stage Principal Advantage

Della’s Delights, Inc. a Provide exit: The company

division of International is sold for cash.
Foods, Inc.
A
A venture
venture capitalist
capitalist isis an
an
individual
individual oror firm
firm that
that
provides
provides equity
equity financing
financing
for
for aa new
new company.
company.
 `
Chapter 13

The
The End
End