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Liquidating Partnerships-Capital Deficiency
Lewis, Zapata, and Fowler share equally in net income and net losses. After the partnership sells all assets for cash, divides the losses on realization, and pays
the liabilities, the balances in the capital accounts are as follows: Lewis, $36,000 Cr.; Zapata, $79,200 Cr.; Fowler, $23,000 Dr.
a. What term is applied to the debit balance in Fowler's capital account?
Deficiency
✓
b. What is the amount of cash on hand?
92,200 ✓
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Check My Work
a. Review the definitions of terms. Remember that the share of a loss on realization may be greater than the balance in a partner's capital account, resulting in a debit
balance.
b. Think back to the accounting equation and the concept of normal balances. What is on the other side of the equation for this liquidating company to balance with the
sum of the partners' capital balances?
c. Journalize the transaction that must take place for Lewis and Zapata to receive cash in the liquidation process equal to their capital account balances. If an
amount box does not require an entry, leave it blank.
Cash
Fowler, Capital
Check My Work
23,000
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