Question
On January 1, 20X1, partners Art, Bru, and Chou, who share profits and losses in the ratio of 6:3:1, respectively, decide to liquidate their partnership.
On January 1, 20X1, partners Art, Bru, and Chou, who share profits and losses in the ratio of 6:3:1, respectively, decide to liquidate their partnership. The partnership trial balance at this date follows: |
Debit | Credit | |||
Cash | $ | 19,200 | ||
Accounts Receivable | 69,000 | |||
Inventory | 55,000 | |||
Machinery and Equipment (net) | 192,000 | |||
Accounts Payable | $ | 54,200 | ||
Art, Capital | 91,000 | |||
Bru, Capital | 113,000 | |||
Chou, Capital | 77,000 | |||
Total | $ | 335,200 | $ | 335,200 |
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 $53,400 on accounts receivable; the balance is uncollectible. |
2. | Received $39,800 for the entire inventory. |
3. | Paid $2,600 liquidation expenses. |
4. | Paid $51,700 to creditors, after offset of a $2,500 credit memorandum received on January 11, 20X1. |
5. | Retained $11,200 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses. |
February 20X1 |
6. | Paid $4,600 liquidation expenses. |
7. | Retained $6,600 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses. |
March 20X1 |
8. | Received $148,400 on sale of all items of machinery and equipment. |
9. | Paid $5,600 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.) |
ABC PARTNERSHIP Statement of Partnership Realization and Liquidation For the period from January 1, 20x1, through March 31, 20X1 Cash 19,200 Other Assets Accounts Payable 316,000 54,2001 Capital Balances Art Bru 91,000 113.000 Chou 77,000 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 53,400 39,800 (2,600) (69,000) (55,000) 2,500 51,700 54,200 $ $ 192,000 $ 91,000 $ 113,000 $ 77,000 (51,700) 58,100 $ (46,900) 11,200 $ Safe payments to partners $ 192,000 $ 54,200 $ 91,000 $ 113,000 $ 77,000 February transactions Liquidation expenses paid (4,600) 6,600 $ $ 192,000 $ 54,200 $ 91,000 $ 113,000 $ 77,000 Safe payments to partners 6,600 $ 192,000 $ 54,200 $ 91,000 $ 113,000 77,000 March transactions: Sale of M&Eq. at a loss Liquidation expenses paid 148,400 5,600 $ 192,000 $ 54,200 $ 91,000 $ 113,000 $ 77.000 Payments to partners Balances at end of liquidation, March 31, 20X1 149,400 $ (149,400) 0 $ $ 192,000 $ 54,200 $ 91,000 $ 113,000 $ 77,000 Chou 10% ABC PARTNERSHIP Schedule of Safe Payments to Partners Art Bru 60% 30% Schedule 1: January 31, 20X1 Capital balances Potential Loss on noncash assets $ 0 $ Allocation of potential deficit Safe payment, January 31, 20X1 $ 0 0 $ 0 0 $ 0 Schedule 2: February 27, 20X1 Capital balances Potential Loss on noncash assets $ 0 $ 0 $ 0 Allocation of potential deficit Safe payment, February 27, 20X1 $ 0 $ 0 $ 0
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