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: Credit Debit $ 18,000 66,000 52,000 189,000 Cash Accounts Receivable Inventory Machinery and Equipment (net) Accounts Payable Art, Capital Bru, Capital Chou, Capital Total $ 53,000 88,000 110,000 74,000 $325,000 $325,000 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 $51,000 on accounts receivable; the balance is uncollectible. 2. Received $38,000 for the entire inventory. 3. Paid $2,000 liquidation expenses. 4. Paid $50,000 to creditors, after offset of a $3,000 credit memorandum received on January 11, 20X1. 5. Retained $10,000 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses. February 20X1 6. Paid $4,000 liquidation expenses. 7. Retained $6,000 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses. March 20X1 8. Received $146,000 on sale of all items of machinery and equipment. 9. Paid $5,000 liquidation expenses. 10. Retained no cash in the business. Prepare a statement of partnership liquidation for the partnership with schedules of safe payments to partners. * Answer is not complete. 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 307,000 Accounts Payable 53,000 18,000 88,000 110,000 74,000 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 51,000 38,000 (2,000) (66,000) (52,000) (3,000) (2,800) 400 600 (50,000) $ 55,000 (45,000) 7,500 (4,500) 7,000 (4,200) 1,000 600 (3,000) (1,500) 900 (50,000) 0 $ 71,000 $ 102,800 $ 3,000 X 86,500 X 209,800 X $ (3.000) $(15,500) (107,000) $ 189,000 $ 189,000 X 69,200 73,400 x Safe payments to partners $ 10,000 $ 0 $ (4,200) February transactions: Liquidation expenses paid 4,000 $ 6,000 $ 0 $ (3,000) $(15,500) $ (107,000) $ (4,200) Safe payments to partners $ 6,000 $ 0 $ (3,000) $ (15,500) $ (4,200) (107,000) March transactions: Sale of M&Eq. at a loss Liquidation expenses paid 5,000 2,000 X 1,200 X 800 X (108,200) $ (5,000) $ 1,000 $ 0 $ (3,000) $ (17,500) Payments to partners Safe payments to partners $ 6,000 $ 0 $ (3,000) $ (15,500) $ (107,000) $ (4,200) March transactions: Sale of M&Eq. at a loss Liquidation expenses paid 5,000 2,000 X 1,200 X 800 $ (17,500) (108,200) $ (5,000) $ 1,000 $ 0 $ (3,000) Payments to partners Balances at end of liquidation, March 31, 20X1 $ 1,000 $ 0 $ (3,000) $ (17,500) $ (108,200) $ (5,000) Chou 20% Answer is not complete. ABC PARTNERSHIP Schedule of Safe Payments to Partners Art Bru 50% 30% Schedule 1: January 31, 20X1 Capital balances $ 74,000 $ 101,600 Potential Losses and Expenses 99,500 $ (25,500) $ 101,600 Allocation of potential deficit 25,500 Safe payment, January 31, 20X1 $ 0 $ 101,600 $ 68,400 $ 68,400 $ 68,400 Schedule 2: February 27, 20X1 Capital balances Potential Losses and Expenses $ (72,000) 97,500 $ (169,500) (22,500) $ (192,000) $ 0 $ 0 Allocation of potential deficit Safe payment, February 27, 20X1 $ 0 $ 0