After working for In the Kitchen remodeling business for several years, Terry and Phyllis decided to go into business for themselves and formed the Kitchens Just for You partnership. Three years ago, they admitted Connie as a partner and recognized goodwill at that time because of her good client list for planned kitchen makeovers. However, they were not able to gain a sufficient market for new customers and on September 1, 20X9, they agreed to dissolve and liquidate the business. They decided on an installment liquidation to complete the projects already initiated. The balance sheet, with profit and losssharing percentages at the beginning of liquidation, is as follows:

Connies loan was for working capital; the loan to Terry was for his unexpected personal medical bills. During September 20X9, the first month of liquidation, the partnership collected $44,000 in receivables and decided to write off $3,000 of the remaining receivables. Sales of one-half of the book value of the inventory realized a loss of $7,000. The partners estimate that the costs of liquidating the business (newspaper ads, signs, etc.), are expected to be $5,000 for the remainder of the liquidation process. Required: Prepare a schedule of safe payments to partners as of September 30, 20X9, to show how the available cash should be distributed to the partners. Please follow the practical guidelines when completing this worksheet.

MY CALCULATIONS:

PLEASE HELP solve for "Possible loss for remaining receivables and inventory".

Assets Cash Receivables Terry, Loan Inventory Goodwill KITCHENS JUST FOR YOU Balance Sheet September 1, 2009 Liabilities and Equities $ 16,000 Accounts Payable 61,000 Connie, Loan 9,000 Terry, Capital (30%) 44,000 Phyllis, Capital (60%) 25,000 Connie, Capital (10%) $ 155,000 Total Liabilities & Equities $ 47,000 14,000 10,000 40,000 44,000 $ 155,000 Total Assets Answer is complete but not entirely correct. KITCHENS JUST FOR YOU Schedule of Safe Payments to Partners Terry Phyllis Connie Capital balances, September 1, 20X9 $ 10,000 $ 40,000 $ 44,000 Loans to (from) partner 0 14,000 Total $ 10,000 $ 40,000 $ 58,000 Write-off of goodwill 7,500 15,000 2,500 Write-off of receivables 900 1,800 300 Loss on sale of inventory 2,100 4,200 700 Capital balances, September 30, 20X9 $ (500) $ 19,000 $ 54,500 Possible loss for remaining receivables and 10,800 21,600 % 3,600 inventory Possible liquidation costs 1,500 3,000 500 Balances $ (12,800) $ (5,600) 50,400 Distribute any potential deficits 12,800 5,600 18,400 Safe payments to partners, September 30, 20X9 $ 0 $ 32,000 0 $ A D . B C 21 22 Kitchens Just For You 23 Schedule of Sage Payments to Partners 24 25 Terry Phyllis 26 0.3 0.6 27 Capital balances, September 1, 20X9 - 10000 -40000 28 Loans to (from) partner o 29 Total =SUM(B27:B28) =SUM(C27:C28) 30 31 Write-off of $25,000 in good will =25000*0.3 =25000*0.6 32 Write-off of $3,000 of receivables =3000*0.3 =3000*0.6 Loss of $7,000 on sale of $22,000 of inventory (one 33 half of $44,000 book value) =7000*0.3 =7000*0.6 34 Capital balances, September 30, 20x9 (* = deficit) -SUM(B29:B33) =SUM(C29:033) Connie 0.1 -44000 - 14000 =SUM(D27:D28) =25000*0.1 =3000*0.1 =7000*0.1 =SUM(D29:D33) Possible loss of $14,000 (61,000-44,000-3,000) for remaining receivables and $22,000 for remaining 35 inventory =(14000+22000)*0.3 =(14000+22000)*0.6 =(14000+22000)*0.1 36 Possible liquidation costs of $5,000 =5000*0.3 =5000*0.6 =5000*0.1 37 Balances (* = potential deficit) =SUM(B34:B36) =SUM(C34:C36) =SUM(D34:D36) Distribute Tery's and Phyllis' ptotential deficits to 38 Connie, the only partner with a capital credit -12800 -5600 =B37+C37 39 Safe payments to partners, September 30, 20x9 =SUM(B37:B38) =SUM(C37:C38) =50400-18400