On January 1, 20X1, partners Art, Bru, and Chou, who share profits and losses in
ID: 2391828 • Letter: O
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. The partnership trial balance at this date follows Debit Credit Cash Accounts Receivable Inventory Machinery and Equipment (net) Accounts Payable Art, Capital Bru, Capital Chou, Capital Total $ 21,600 75,000 61,000 198,000 $56,600 97,000 119,000 83,000 $355,600 $355,600 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 $58,200 on accounts receivable; the balance is uncollectible 2. Received $43,400 for the entire inventory. 3. Paid $3,800 liquidation expenses 4. Paid $52,500 to creditors, after offset of a $4,100 credit memorandum received on January 11, 20X1 5. Retained $12,500 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expensesExplanation / Answer
ABC PARTNERSHIP STATEMENT OF PARTNERSHIP REALISATION AND LIQUIDATION DATE PARTICULARS CASH OTHER ASSETS ACCOUNTS PAYABLE CAPITAL ACCOUNTS ART BRU CHOU JANUARY BALANCE BEFORE LIQUIDATION 21600 334000 56600 97000 119000 83000 JANUARY TRANSACTIONS SALE OF INVENTORY AT LOSS 43400 17600 10560 5280 1760 COLLECTION OF ACCOUNTS RECIEVABLE AT LOSS 58200 16800 10080 5040 1680 LIQUIDATION EXPENSES PAID -3800 2280 1140 380 PAYMENTS TO CREDITORS -56600 REATINED CASH 12500 BALANCE AMOUNT TO PARTNERES 50300 AMOUNT DISTRIBUTED IN THE RATIO OF 6:3:1 50300 30180 15090 5030 FEBARUARY OPENING BALANCE OF CASH 12500 43900 92450 74150 LIQUIDATION EXPENSES PAID -5800 3480 1740 580 RETAINED CASH BALACNE 6700 40420 90710 73570 MARCH OPENING CASH BALANCE 6700 SALE OF MACHINERY 154800 43200 25920 12960 4320 LIQUIDATION EXPENSES PAID 4200 2520 1260 420 TOTAL CASH BALANCE 157300 AMOUNT DISTRIBUTED IN THE RATIO OF 6:3:1 157300 94380 47190 15730 SHARE OF PROFIT RESTRICTED TO CAPITAL ACCOUNT 37900 89450 73150 SCHEDULE OF SAFE PAYMENTS TO PARTNERS ART BRU CHOU SCHEDULE 1 OPENING BALANCE 97000 119000 83000 POTENTIAL LOSS 22920 11460 3820 ALLOCATION OF POTENTIAL DEFFICIET 30180 15090 5030 SAFE PAYMENT 43900 92450 74150 SCHEDULE 2 OPENING BALANCE 43900 92450 74150 POTENTIAL LOSS 6000 3000 1000 ALLOCATION OF POTENTIAL DEFFICIET 37900 89450 73150