This document discusses the process of dissolving a partnership. It explains how to calculate and record gains or losses on the realization of assets when they are sold. It also covers liquidating partnership liabilities by paying off creditors and distributing any remaining cash balances to partners based on their fixed ownership percentages. Key terms reviewed include liquidation of a partnership, realization, and limited liability partnership.

1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 23-3LESSON 23-3
Dissolving a Partnership

2. 2
LESSON 23-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
ACCOUNT BALANCES BEFOREACCOUNT BALANCES BEFORE
REALIZATIONREALIZATION page 686

3. 3
LESSON 23-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
GAIN ON REALIZATIONGAIN ON REALIZATION page 686
1. Calculate the gain. 2. Record the entry.
22
August 1, 20--. Received cash from sale of truck, $13,000.00: original cost,
$20,000.00; total accumulated depreciation recorded to date, $8,000.00.
Receipt No. 316.
Gain on
Realization
=Book Value of
Asset Sold
–Value of Asset
Received
$1,000.00=–Cash $13,000.00
Cost
$20,000.00
Accum. Depr.
8,000.00
Book Value
$12,000.00
11

4. 4
LESSON 23-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LOSS ON REALIZATIONLOSS ON REALIZATION page 687
1. Calculate the loss. 2. Record the entry.
22
August 1. Received cash from sale of supplies, $1,100.00; balance
of supplies account, $1,500.00. Receipt No. 317.
Loss on
Realization
=Book Value of
Asset Sold
–Value of Asset
Received
$(400.00)=–Cash $1,100.00 Supplies $1,500.00
11

5. 5
LESSON 23-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LIQUIDATING LIABILITIESLIQUIDATING LIABILITIES page 688
August 4, 20--. Paid cash to all creditors for the amounts owed,
$4,000.00. Check No. 422.

6. 6
LESSON 23-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
ACCOUNT BALANCES AFTER LIQUIDATIONACCOUNT BALANCES AFTER LIQUIDATION
OF NONCASH ASSETS AND PAYMENT OFOF NONCASH ASSETS AND PAYMENT OF
LIABILITIESLIABILITIES page 688

7. 7
LESSON 23-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
$360.00
240.00
$600.00
=
=
60%
40%
×
×
$600.00
$600.00
Walker
Jeter
Total
Share of the Balance of Loss
and Gain on Realization
=Fixed
Percentage
×Balance of Loss and
Gain on Realization
DISTRIBUTING LOSS OR GAIN ONDISTRIBUTING LOSS OR GAIN ON
REALIZATION TO PARTNERSREALIZATION TO PARTNERS page 689
August 6, 20--. Recorded distribution of gain on realization: to Adam
Walker, $360.00; to Shirley Jeter, $240.00. Memorandum No. 412.
1. Calculate
each partner’s
share of gain
or loss.
2. Record entry
to distribute
gain or loss.
22
11

8. 8
LESSON 23-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
DISTRIBUTING REMAINING CASH TODISTRIBUTING REMAINING CASH TO
PARTNERSPARTNERS page 689
August 6. Recorded final distribution of remaining cash to partners:
to Adam Walker, $18,360.00; to Shirley Jeter, $12,740.00. Check
Nos. 423 and 424.

9. 9
LESSON 23-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
TERMS REVIEWTERMS REVIEW
 liquidation of a partnership
 realization
 limited liability partnership (LLP)
page 690

10. 9
LESSON 23-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
TERMS REVIEWTERMS REVIEW
 liquidation of a partnership
 realization
 limited liability partnership (LLP)
page 690