CHAPTER 16, 2 PLEASE READ: Please answer the FULL question, please TYPE your ans
ID: 2393837 • Letter: C
Question
CHAPTER 16, 2
PLEASE READ: Please answer the FULL question, please TYPE your answer, please LABEL your answer.
On January 1, 20X1, partners Art, Bru, and Chou, who share profits and losses in the ratio of 6:2:2, 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 $ 20,800 73,000 59,000 196,000 $55,800 95,000 117,000 81,000 $348,800 $348,800 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 $56,600 on accounts receivable; the balance is uncollectible 2. Received $42,200 for the entire inventory 3. Paid $3,400 liquidation expenses 4. Paid $52,300 to creditors, after offset of a $3,500 credit memorandum received on January 11, 20X1 5. Retained $12,800 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expensesExplanation / Answer
ABC Partnership Statement of Partnership Realization and Liquidation For the Period from January 1,20X1, through March 31,20X1 Cash Other assets Accounts Payable Art's Capital Bru's Capital Chou's Capital Balance before liquidation on 1st Jan ,20X1 20800 328000 -55800 -95000 -117000 -81000 Collection from Accounts Receivable after loss of ($73000-$56600)=$16400 56600 -73000 9840 3280 3280 Collection from sale of Inventory($59000-$42200)=$16800 42200 -59000 10080 3360 3360 Liquidation Expenses Paid -3400 2040 680 680 Credit Memorandum 3500 -2100 -700 -700 Payment to Creditors -52300 52300 63900 196000 0 -75140 -110380 -74380 Safe Payment to Partners(63900-$12800) -51100 25550 25550 12800 196000 0 -75140 -84830 -48830 Feb Transactions Liquidation Expenses Paid -5400 3240 1080 1080 Safe Payment to Partners 0 0 0 0 7400 196000 -71900 -83750 -47750 March transactions Received $152400 for sale of Equipment on loss of ($196000-$152400) 152400 -196000 26160 8720 8720 Liquidation Expenses Paid -6400 3840 1280 1280 153400 0 -41900 -73750 -37750 Payment to Partners -153400 41900 73750 37750 Balance at the end of liquidation,March31st 0 0 0 0 0 ABC Partnership Schedule of safe payment to Partners Art's Capital Bru's Capital Chou's Capital Capital balances $ -75,140.00 $ -1,10,380.00 $ -74,380.00 Possible Loss:(Other assets $196000and possible liquidation expenses $12800) $ 1,25,280.00 $ 41,760.00 $ 41,760.00 $ 50,140.00 $ -68,620.00 $ -32,620.00 Deficit of Art's Capital $ -50,140.00 Bru's Capital $ 25,070.00 Chou's Capital $ 25,070.00 Safe Payment on January 31st, 20X1 $ - $ -43,550.00 $ -7,550.00 Capital balances $ -71,900.00 $ -83,750.00 $ -47,750.00 Possible Loss:(Other assets $196000and possible liquidation expenses $7400) $ 1,22,040.00 $ 40,680.00 $ 40,680.00 $ 50,140.00 $ -43,070.00 $ -7,070.00 Deficit of Art's $ -50,140.00 Bru's Capital($50140*2/4) $ 25,070.00 Chou's Capital($50140*2/4) $ 25,070.00 Safe Payment on February 28th, 20X1 $ - $ 22,680.00 $ 18,000.00