Question
On January 1, the partners of Van, Bakel, and Cox (who share profits and losses in the ratio of 5:3:2, respectively) decide to liquidate their
On January 1, the partners of Van, Bakel, and Cox (who share profits and losses in the ratio of 5:3:2, respectively) decide to liquidate their partnership. The trial balance at this date follows:
Debit Credit
Cash $ 40,000
Accounts receivable 110,000
Inventory 96,000
Machinery and equipment, net 233,000
Van, loan 74,000
Accounts payable $ 99,000
Bakel, loan 64,000
Van, capital 182,000
Bakel, capital 112,000
Cox, capital 96,000
Totals $ 553,000 $ 553,000
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 $73,000 of the accounts receivable; the balance is deemed uncollectible. Received $60,000 for the entire inventory. Paid $8,000 in liquidation expenses. Paid $90,000 to the outside creditors after offsetting a $9,000 credit memorandum received by the partnership on January 11. Retained $32,000 cash in the business at the end of January to cover any unrecorded liabilities and anticipated expenses. The remainder is distributed to the partners.
February
Paid $9,000 in liquidation expenses. Retained $20,000 cash in the business at the end of the month to cover unrecorded liabilities and anticipated expenses.
March
Received $168,000 on the sale of all machinery and equipment. Paid $11,000 in final liquidation expenses. Retained no cash in the business.
Prepare a schedule to compute the safe installment payments made to the partners at the end of each of these three months.
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