On January 1, 20X1, partners Art, Bru, and Chou, who share profits and losses in the ratio of 5:3:2, respectively, decide to liquidate their partnership.
On January 1, 20X1, partners Art, Bru, and Chou, who share profits and losses in the ratio of 5:3:2, respectively, decide to liquidate their partnership. The partnership trial balance at this date follows:
| | Debit | Credit |
| Cash | | $ | 21,000 | | | | | |
| Accounts Receivable | | | 73,500 | | | | | |
| Inventory | | | 59,500 | | | | | |
| Machinery and Equipment (net) | | | 196,500 | | | | | |
| Accounts Payable | | | | | | $ | 56,000 | |
| Art, Capital | | | | | | | 95,500 | |
| Bru, Capital | | | | | | | 117,500 | |
| Chou, Capital | | | | | | | 81,500 | |
| Total | | $ | 350,500 | | | $ | 350,500 | |
| |
The partners plan a program of piecemeal conversion of assets to minimize liquidation losses. All available cash, less an amount retained to provide for future expenses, is to be distributed to the partners at the end of each month. A summary of the liquidation transactions follows: January 20X1
- Collected $57,000 on accounts receivable; the balance is uncollectible.
- Received $42,500 for the entire inventory.
- Paid $3,500 liquidation expenses.
- Paid $52,400 to creditors, after offset of a $3,600 credit memorandum received on January 11, 20X1.
- Retained $13,000 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses.
February 20X1
- Paid $5,500 liquidation expenses.
- Retained $7,500 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses.
March 20X1
- Received $153,000 on sale of all items of machinery and equipment.
- Paid $6,500 liquidation expenses.
- Retained no cash in the business.
Required: Prepare a statement of partnership liquidation for the partnership with schedules of safe payments to partners. (Round your answers to nearest whole dollar.)
Cash On January 1, 20X1, partners Art, Bru, and Chou, who share profits and losses in the ratio of 5:3:2, respectively, decide to liquidate their partnership. The partnership trial balance at this date follows: Debit Credit $ 21,000 Accounts Receivable 73,500 Inventory 59,500 Machinery and Equipment (net) 196,500 Accounts Payable $ 56,000 Art, Capital 95,500 Bru, Capital 117,500 Chou, Capital 81,500 Total $350,500 $350,500 The partners plan a program of piecemeal conversion of assets to minimize liquidation losses. All available cash, less an amount retained to provide for future expenses, is to be distributed to the partners at the end of each month. A summary of the liquidation transactions follows: January 20X1 1. Collected $57,000 on accounts receivable; the balance is uncollectible. 2. Received $42,500 for the entire inventory. 3. Paid $3.500 liquidation expenses. 4. Paid $52,400 to creditors, after offset of a $3.600 credit memorandum received on January 11, 20X1. 5. Retained $13,000 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses. February 20X1 6. Paid $5,500 liquidation expenses. 7. Retained $7.500 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses. March 20X1 8. Received $153.000 on sale of all items of machinery and equipment. 9. Paid $6.500 liquidation expenses. 10. Retained no cash in the business. Required: Prepare a statement of partnership liquidation for the partnership with schedules of safe payments to partners. (Round your answers to nearest whole dollar.) Required: Prepare a statement of partnership liquidation for the partnership with schedules of safe payments to partners. (Round your answers to nearest whole dollar.) Answer is complete but not entirely correct. ABC PARTNERSHIP Statement of Partnership Realization and Liquidation For the period from January 1, 20x1, through March 31, 20X1 Capital Balances Cash Art Bru Chou Other Assets 329,500 Accounts Payable (56,000) 21,000 95,500 117.500 81,500 Balances before liquidation, January 1, 20X1 January transactions: Collection of accounts receivable at a loss Sale of inventory at a loss Liquidation expenses paid Share of credit memorandum Payments to creditors 57,000 42,500 (3,500) (73.500) (59.500) 8,250 8,500 1,750 1,800 4.950 5.100 1.050 1.080 3,300 3,400 700 720 3.600 52,400 (56,000) IS $ 196,500 S $ 78,800 $ 107.480 $ 74,820 (52,400) 64,600 51.600 13,000 Safe payments to partners 25.800 15,480 X 10.320 X $ $ 196,500 S (56,000) $ 53,000 $ 92.000 $ 64,500 February transactions: Liquidation expenses paid (5,500) 7,500 2.750 50,250 1.650 90.350 1.100 63,400 Is $ 196,500 s (56,000) $ $ $ Safe payments to partners $ 7.500 $ 196,500 S (56,000) $ 50,250 $ 90.350 S 63,400 March transactions: Sale of M&Eq. at a loss Liquidation expenses paid (196.500) 153,000 (6,500) $ 154,000 21,750 3,250 $ 25,250 13.050 1.950 75.350 8,700 1,300 53,400 $ 0 S (56,000) $ $ 77,000 $ Payments to partners Balances at end of liquidation, March 31, 20X1 (154,000) 0 48.200 29.150 30,800 22,600 $ $ 0 (56,000) $ (51,750) $ $ Answer is complete but not entirely correct. ABC PARTNERSHIP Schedule of Safe Payments to Partners Art Bru Chou 50% 30% 20% Schedule 1: January 31, 20X1 Capital balances $ 78,800 $ 107.480 $ 74.820 Potential Loss on noncash assets 104,750 62,850 41,900 $ (25.950) $ 44,630 $ 32.920 Allocation of potential deficit 25,950 17.970 X 11.980 Safe payment, January 31, 20X1 $ 0 S 28.860 $ 20,940 Schedule 2: February 27, 20X1 Capital balances Potential Loss on noncash assets $ 90.350 $ $ 50,250 102,000 $ (51.750) 63.400 40.800 22,600 61.200 29,150 20,150 s $ 51.750 % 22.600 X Allocation of potential deficit Safe payment, February 27, 20X1 $ 0 S 0 $ 0
