On January $1,$ the partners of Mori, Lux, and Khan $($who share profits and losses in the ratio of $5$:$3$:$2,$ respectively$)$ decide to terminate operations and liquidate their partnership. The trial balance at this date follows:

General Journal Debit Credit

Cash $ $28,000$

Accounts receivable $86,000$

Inventory $72,000$

Machinery and equipment, net $209,000$

Mori, loan $50,000$

Accounts payable $ $93,000$

Lux, loan $40,000$

Mori, capital $128,000$

Lux, capital $100,000$

Khan, capital $84,000$

Totals $ $445,000$ $ $445,000$

The partners plan a program of piecemeal conversion of the partnership$$s 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 Collected $$51,000$ of the accounts receivable; the balance is deemed uncollectible.

January Received $$48,000$ for the entire inventory.

January Paid $$4,000$ in liquidation expenses.

January Paid $$88,000$ to the outside creditors after offsetting a $$5,000$ credit memorandum received by the partnership on January $11.$

January Retained $$20,000$ cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners.

February Paid $$5,000$ in liquidation expenses.

February Retained $$8,000$ cash in the business at the end of the month to cover additional liquidation expenses.

March Received $$156,000$ on the sale of all machinery and equipment.

March Paid $$7,000$ in final liquidation expenses.

March Retained no cash in the business.

Required:

Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of February.

Note: Amounts to be deducted should be entered with a minus sign.

MORI, LUX, AND KHAN PARTNERSHIP

Proposed Schedule of Liquidation

February $28$

Cash Noncash Assets Liabilities Mori, Capital and Loan $50\%$ Lux, Capital and Loan $30\%$ Khan, Capital $20\%$

Balances before January $31$ safe payments $$51,000$

Safe payments to partners $-$ January $3120,000$

Balances $-$ February $171,00000000$

Paid liquidation expenses $20,000$

Subtotal $($actual balances$)91,00000000$

Maximum loss on assets

Maximum liquidation expenses

Subtotal $($potential balances$)91,00000000$

Allocation of deficit capital balance

Safe payments to partners $-$ February $28$ $$91,000$ $$0$ $$0$ $$0$ $$0$ $$0$