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:

	Debit	Credit
Cash	$ 42,000
Accounts receivable	114,000
Inventory	100,000
Machinery and equipment, net	237,000
Mori, loan	78,000
Accounts payable		$ 96,000
Lux, loan		68,000
Mori, capital		195,000
Lux, capital		114,000
Khan, capital		98,000
Totals	$ 571,000	$ 571,000

The partners plan a program of piecemeal conversion of the partnerships 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 $75,000 of the accounts receivable; the balance is deemed uncollectible.
January	Received $62,000 for the entire inventory.
January	Paid $2,000 in liquidation expenses.
January	Paid $93,000 to the outside creditors after offsetting a $3,000 credit memorandum received by the partnership on January 11.
January	Retained $34,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners.
February	Paid $3,000 in liquidation expenses.
February	Retained $22,000 cash in the business at the end of the month to cover additional liquidation expenses.
March	Received $170,000 on the sale of all machinery and equipment.
March	Paid $5,000 in final liquidation expenses.
March	Retained no cash in the business.

Required:

Prepare proposed schedules of liquidation on January 31, February 28, and March 31 to determine the safe payments made to the partners at the end of each of these three months.

January

• February
• March

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

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

MORI, LUX, AND KHAN PARTNERSHIP
Proposed Schedule of Liquidation
January 31
	Cash	Noncash Assets	Liabilities	Mori, Capital and Loan 50%	Lux, Capital and Loan 30%	Khan, Capital 20%
Balances - January 1
Collected accounts receivable
Sold inventory
Paid liquidation expenses
Paid accounts payable
Subtotal (actual balances)	0	0	0	0	0	0
Maximum loss on assets
Maximum liquidation expenses
Subtotal (potential balances)	0	0	$0	0	0	0
Allocation of deficit capital balance
Safe payments to partners - January 31	$0	$0	$0	$0	$0	$0

• January
• February
• March

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
Safe payments to partners - January 31
Balances - February 1	0	0	0	0	0	0
Paid liquidation expenses
Subtotal (actual balances)	0	0	0	0	0	0
Maximum loss on assets
Maximum liquidation expenses
Subtotal (potential balances)	0	0	0	0	0	0
Allocation of deficit capital balance
Safe payments to partners - February 28	$0	$0	$0	$0	$0	$0

• January
• February
• March

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

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

MORI, LUX, AND KHAN PARTNERSHIP
Proposed Schedule of Liquidation
March 31
	Cash	Noncash Assets	Liabilities	Mori, Capital and Loan 50%	Lux, Capital and Loan 30%	Khan, Capital 20%
Balances before February 28 safe payments
Safe payments to partners - February 28
Balances - March 1	0	0	0	0	0	0
Sold machinery
Paid liquidation expenses
Subtotal (actual balances)	0	0	0	0	0	0
Safe payments to partners - March 31
Ending balances - March 31	$0	$0	$0	$0	$0	$0