Hardin, Sutton, and Williams Have Operated a Local Business as a Partnership

question 10

Essay

Hardin, Sutton, and Williams have operated a local business as a partnership for several years. All profits and losses have been allocated in a 3:2:1 ratio, respectively. Recently, Williams has undergone personal financial problems, and is insolvent. To satisfy Williams' creditors, the partnership has decided to liquidate.
The following balance sheet has been produced:
During the liquidation process, the following transactions take place:
- Noncash assets are sold for $116,000.
- Liquidation expenses of $12,000 are paid. No further expenses are expected.
- Safe capital distributions are made to the partners.
- Payment is made of all business liabilities.
- Any deficit capital balances are deemed to be uncollectible.
Prepare journal entries to record the actual liquidation transactions.

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Definitions:

Lochner V. New York

A landmark U.S. Supreme Court case from 1905 that struck down a New York law setting maximum working hours, ruling it as an unconstitutional interference with individual freedom of contract.

Right Of Contract

The legal ability of individuals or entities to enter into binding agreements without coercion or undue influence.

Individual Freedom

The liberty of an individual to act, speak, or think as one desires without hindrance or restraint, within the limits of law.

Federal Assistance

Financial or material support provided by the federal government to individuals, organizations, or state and local governments.