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Assume that the sale of the $32,000 of other assets in the example given earlier realizes only $22,000. The following entry records the sale:
The $10,000 loss is then allocated to each partner in accordance with the 5:3:2 profit and loss sharing ratio.
The payment of liabilities is then recorded.
The partnership balance sheet would show:
The following entry records the final distribution of cash to the partners:
Note that the balance in each capital account is again zero following the distribution of cash, and the liquidation is complete.
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