Slim, Lucky, and Maebell have operated a local business as a partnership for several years. Recently, Macbelle has undergone personal financial problems and is insolvent. To satisfy her creditors, the partnership has decided to liquidate. At this point in time, the partners' capital balances are: $ Lucky Slim Maebelle 825,000 425,000 260,000 Liquidation expenses are expected to be Profits and losses have been allocated in the following ratio 23,000 1.1.2 Required: Prepare a Pre-Distribution Plan to be used during the liquidation process. + 0 4 8 PART Al(60 points) Information Nicholas and Rudy agree to form a partnership on January 1, 2019. Nicholas has operated a business a sole proprietorship for a number of years and will contribute the net assets of his business to the partnership. The 1 appraised value of the net assets in Nicholas's business are given below. 2 3 Cash s 6,000 Receivables 12,000 5 Inventory 24,000 16 Property, plant & equipment 75,000 17 Accounts payable (10,000) 18 Accrued liabilities (23,000) 19 Mortgage payable (35,000) 20 Net Assets $ 49.000 21 22 Rudy has significant experience in marketing and will 23 contribute cash in the amount of 45,000 s 25 Nicholas and Rudy agree to begin operations with capital balances equal to their initial investments. The partnership agreement indicates that the bonus method will be used to account for any subsequent changes in 26 partner ownership 27 The Articles of Partnership (the partnership agreement) provide that income and losses are to be allocated in the 28 following manner: 29 Nicholas is to receive a salary of $ 36,000 Rudy is to receive a salary of $ 52,000 32 Interest is calculated on the beginning capital balances at a rate of 10% 30 31 10% 2:4 Nicholas is to receive a bonus based on net income after subtracting the bonus, salary allowance, and the interest. Also included in the agreement is the provision that there will be no bonus if there is a net loss or if salary and interest result in a 33 negative remainder of net income to be distributed. The bonus as a percentage is 34 The remaining gain or loss is to be allocated to Nicholas and Rudy in the ratio of 35 36 37 Each partner is provided a monthly draw of 38 39 Income for 2019 amounted to 40 41 On January 2, 2020, Wish joined the partnership by paying Nicholas and Rudy directly. For Sheet1 s 1.200 $ 275,000 Ready A 10% negative remainder of net income to be distributed. The bonus as a percentage 15 The remaining gain or loss is to be allocated to Nicholas and Rudy in the ratio of 2:4 s Each partner is provided a monthly draw of 1,200 $ Income for 2019 amted to 275,000 On January 2, 2020, Wish joined the partnership by paying Nicholas and Rudy directly. For this payment, Wish received a partnership interest of 30% The total amount that Wish paid to Nicholas and Rudy was S 225,000 50,000 The partnership agreement was revised to allow Wish a salary of Nicholas's and Rudy's salaries remain unchanged Interest is allowed on all partner's beginning capital balances at the previous rate. Nicholas continues to receive the bonus as stated in the initial agreement. The remaining gain or loss is to be to Nicholas, Rudy, and Wish in the ratio of: 2:4:2 Each partner is provided a monthly draw of $ 1,200 Income for 2020 amounted to $ 310,000 On January 1, 2021, Nicholas decided to retire and is paid an amount equal to his capital balance plus a stated percentage of 30% After Nicholas's retirement, Rudy and Wish continue to receive their previously established salaries and interest. Remaining profits and losses are allocated to Ruday and Wish in the ratio of 4:2 Income for 2021 amounted to 330,000 Required: 1. For each of the years 2019-2021, prepare a Statement of Partnership Capital b. Schedule of Income Allocation 72 PART B (60 points) 73 74 75 On January 1, 2021, the partners of Wind, Ramblet, and Delilah decided to liquidate their partnership. The trial 20 balance at this date was as follows 77 78 Debit Credit 79 80 5 23,400 81 Accounts receivable 85,800 82 Inventory 67,600 83 Machinery & equipment, net 245,700 84 Loan receivable from Wind 39,000 85 Accounts payable $ 68,900 86 Loan payable to Rambler 26,000 87 Wind, capital 153.400 88 Rambler, capital 117,000 89 Delilah, capital 96,200 90 $ 461,500 5 461,500 91 92 The partners planned a program of piecemeal conversion of the business assets to minimize liquidation losses. All available cash, less an amount retained to provide for future expenses, was to be distributed to the partners at the 93 end of each month. A summary of the liquidation transactions follows. 94 95 The partners shared profits and losses in the ratio of 5:2:3 96 97 January 98 >> 5 70,000 collected on the accounts receivable, the balance was deemed uncollectible 99 48,000 received for the entire inventory 100 > 4,000 liquidation expenses were paid 101 39,000 paid to the outside creditors 102 A safe capital distribution was made to the partners. Additional liquidation 103 expenses are expected to be paid in February 104 105 February 106 > 4,200 additional liquidation expenses were paid > > > > > 107 108 109 110 189,800 was received on the sale of all machinery and equipment The balance of the liabilities were paid All remaining cash, if any was distributed to the partners Sheet1 + Ready February: > 4,200 additional liquidation expenses were paid > 189,800 was received on the sale of all machinery and equipment The balance of the liabilities were paid All remaining cash, if any was distributed to the partners. 1 Required: Without preparing a pre-distribution plan, prepare a schedule of liquidation and any schedule(s) of safe capital distributions necessary for the partnership. 3 4 5 PART C (30 points) 8 Slim, Lucky, and Macbell have operated a local business as a partnership for several years. Recently, Macbelle has o undergone personal financial problems and is insolvent. To satisfy her creditors, the partnership has decided to liquidate. At this point in time, the partners' capital balances are: 3 4 s 6 Lucky Slim Maebelle 825,000 425,000 260,000 7 8 Liquidation expenses are expected to be Profits and losses have been allocated in the following ratio 23,000 1:1:2 9 Required: Prepare a Pre-Distribution Plan to be used during the liquidation process, 1 2 3