On January 1, the partners of Van, Bakel, and Cox (who share profits and losses
ID: 2414918 • Letter: O
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 partnership. The trial balance at this date follows:
The partners plan a program of piecemeal conversion of the business's 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 $51,000 of the accounts receivable; the balance is deemed uncollectible. Received $48,000 for the entire inventory. Paid $4,000 in liquidation expenses. Paid $88,000 to the outside creditors after offsetting a $5,000 credit memorandum received by the partnership on January 11. Retained $20,000 cash in the business at the end of January to cover any unrecorded liabilities an anticipated expenses. The remainder is distributed to the partners.
February: Paid $5,000 in liquidation expenses. Retained $8,000 cash in the business at the end of the month to cover unrecorded liabilities and anticipated expenses.
March: Received $156,000 on the sale of all machinery and equipment. Paid $7,000 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.
Debit Credit Cash $ 28,000 Accounts receivable 86,000 Inventory 72,000 Machinery and equipment, net 209,000 Van, loan 50,000 Accounts payable $93,000 Bakel, loan 40,000 Van, capital 128,000 Bakel, capital 100,000 Cox, capital 84,000 Totals $445,000 $445,000Explanation / Answer
In the month of Jan
Cash Op Bal : 28000
add: recd from 51000
accounts receivable
inventory 48000
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127000
less : liquidation
expenses 4000
less: cl balance 20000
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available to partners 103000
Van = 103000*5/10 =51500
bakel = 103000*3/10 =30900
cox = 103000*2/10 =20600
In the month of FEB
Cash Op Bal 20000
less: liquidation
expenses 5000
less: cl balance 8000
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available to partners 7000
Van = 7000*5/10 =3500
bakel = 7000*3/10 =2100
cox = 7000*2/10 =1400
in the month of March
cash op balance 8000
add sale of Machinery 156000
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164000
less: liquidation
expenses 7000
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available to partners 157000
Van = 157000*5/10 =78500
bakel = 157000*3/10 =47100
cox = 157000*2/10 =31400