On January 1, the partners of Van, Bakel, and Cox (who share profits and losses
ID: 2566071 • 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: DebitCredit Cash Accounts receivable Inventory Machinery and equipment, net Van, loan Accounts payable Bakel, loan Van, capital Bakel, capital Cox, capital 29,e08 88,808 74,808 211,808 52,8ee 42,808 129,800 181,808 85,888 Totals $ 454,808 454,808 The partners plan a program of piecemeal conversion of the partnership'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: anuary Collected $62,888 of the accounts receivable; the balance is deemed uncollectible Received $49,888 for the entire inventory Paid $5,808 in 1iquidation expenses Paid $91,888 to the outside creditors after offsetting a $6,880 credit memorandum received by the partnership on January 11 Retained $21,888 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 $6,888 in liquidation expenses Retained $9,8ee cash in the business at the end of the month to cover unrecorded liabilities and anticipated expenses March Received $157,888 on the sale of all machinery and equipment Paid $8,888 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. (Do not round Intermedlete colculetlons.)Explanation / Answer
VAN, BAKEL, AND COX PARTNERSHIP
Safe Installment system to Partners
January. 31
Van
%
Bakel
%
Cox
%
Total
Profit and loss ratio
50
30
20
100
Capital balances - Jan. 1
129000
101000
85000
315000
Add (Deduct ) loans
-52000
42000
-10000
Adjusted capital balances - Jan. 1
77000
143000
85000
305000
Allocation of Jan net loss
25000
15000
10000
50000
Capital balances - Jan. 31
52000
128000
75000
255000
Potential loss
-116000
-69600
-46400
-232000
Subtotal
-64000
58400
28600
23000
Allocation of deficit balances
64000
-38400
-25600
0
Safe payments to partners - Jan. 31
0
20000
3000
23000
Cash Balance
Balance - Jan. 01
29000
collected A/R
62000
Collected - Inventory
49000
Total cash Balance
140000
Less:
Paid for liquidation expense
5000
Paid for Creditors
91000
Total Payments
96000
Cash Balance available
44000
Less: Balance required for unrecorded liabilty
21000
Cash to be distributed to Partners
23000
Loss of Jan
A/R - Balance
88000
Less: Collected
62000
Loss of A/R
26000
Inventory - Balance
74000
Less: Collected
49000
Loss of Inventory
25000
Payment of liquidation expense
5000
Gain from Accounts payable
6000
Total loss to be distributed
50000
VAN, BAKEL, AND COX PARTNERSHIP
Safe Installment system to Partners
Feb-28
Van
%
Bakel
%
Cox
%
Total
Profit and loss ratio
50
30
20
100
Capital balances - Jan. 31
52000
128000
75000
255000
Safe Payment - Jan. 31
0
20000
3000
23000
Capital balances - Feb. 1
52000
108000
72000
232000
Allocation of Feb net loss
3000
1800
1200
6000
Capital balances - Feb. 28
49000
106200
70800
226000
Potential loss
110000
66000
44000
220000
Subtotal
-61000
40200
26800
6000
Allocation of deficit balances
61000
-36600
-24400
0
Safe payments to partners - Feb. 28
0
3600
2400
6000
Cash Balance
Balance - Feb. 01
21000
Total cash Balance
21000
Less:
Paid for liquidation expense
6000
Total Payments
6000
Cash Balance available
15000
Less: Balance required for unrecorded liabilty
9000
Cash to be distributed to Partners
6000
Loss of Feb
Paid for liquidation expense
6000
Total loss to be distributed
6000
VAN, BAKEL, AND COX PARTNERSHIP
Safe Installment system to Partners
March. 31
Van
%
Bakel
%
Cox
%
Total
Profit and loss ratio
50
30
20
100
Capital balances - Feb. 28
49000
106200
70800
226000
Safe Payment - Feb. 28
3000
1800
1200
6000
Capital balances - March 1
46000
104400
69600
220000
Allocation of March net loss
31000
18600
12400
62000
Capital balances - Mar. 31
15000
85800
57200
158000
Final Payment to partners - March 31
15000
85800
57200
158000
Ending Balance - march 31
0
0
0
0
Cash Balance
Balance - Mar. 01
9000
Collection of Machinery & Equipment
157000
Total cash Balance
166000
Less:
Payment of liquidation expense
8000
Total Payments
8000
Cash Balance available
158000
Less: Balance required for unrecorded liabilty
Cash to be distributed to Partners
158000
Loss of Mar
Machinery & Equipment - Balance
211000
Less: Collected
157000
Loss of Machinery & equipment
54000
Payment of liquidation expense
8000
Total loss to be distributed
62000
VAN, BAKEL, AND COX PARTNERSHIP
Safe Installment system to Partners
January. 31
Van
%
Bakel
%
Cox
%
Total
Profit and loss ratio
50
30
20
100
Capital balances - Jan. 1
129000
101000
85000
315000
Add (Deduct ) loans
-52000
42000
-10000
Adjusted capital balances - Jan. 1
77000
143000
85000
305000
Allocation of Jan net loss
25000
15000
10000
50000
Capital balances - Jan. 31
52000
128000
75000
255000
Potential loss
-116000
-69600
-46400
-232000
Subtotal
-64000
58400
28600
23000
Allocation of deficit balances
64000
-38400
-25600
0
Safe payments to partners - Jan. 31
0
20000
3000
23000
Cash Balance
Balance - Jan. 01
29000
collected A/R
62000
Collected - Inventory
49000
Total cash Balance
140000
Less:
Paid for liquidation expense
5000
Paid for Creditors
91000
Total Payments
96000
Cash Balance available
44000
Less: Balance required for unrecorded liabilty
21000
Cash to be distributed to Partners
23000
Loss of Jan
A/R - Balance
88000
Less: Collected
62000
Loss of A/R
26000
Inventory - Balance
74000
Less: Collected
49000
Loss of Inventory
25000
Payment of liquidation expense
5000
Gain from Accounts payable
6000
Total loss to be distributed
50000
VAN, BAKEL, AND COX PARTNERSHIP
Safe Installment system to Partners
Feb-28
Van
%
Bakel
%
Cox
%
Total
Profit and loss ratio
50
30
20
100
Capital balances - Jan. 31
52000
128000
75000
255000
Safe Payment - Jan. 31
0
20000
3000
23000
Capital balances - Feb. 1
52000
108000
72000
232000
Allocation of Feb net loss
3000
1800
1200
6000
Capital balances - Feb. 28
49000
106200
70800
226000
Potential loss
110000
66000
44000
220000
Subtotal
-61000
40200
26800
6000
Allocation of deficit balances
61000
-36600
-24400
0
Safe payments to partners - Feb. 28
0
3600
2400
6000
Cash Balance
Balance - Feb. 01
21000
Total cash Balance
21000
Less:
Paid for liquidation expense
6000
Total Payments
6000
Cash Balance available
15000
Less: Balance required for unrecorded liabilty
9000
Cash to be distributed to Partners
6000
Loss of Feb
Paid for liquidation expense
6000
Total loss to be distributed
6000
VAN, BAKEL, AND COX PARTNERSHIP
Safe Installment system to Partners
March. 31
Van
%
Bakel
%
Cox
%
Total
Profit and loss ratio
50
30
20
100
Capital balances - Feb. 28
49000
106200
70800
226000
Safe Payment - Feb. 28
3000
1800
1200
6000
Capital balances - March 1
46000
104400
69600
220000
Allocation of March net loss
31000
18600
12400
62000
Capital balances - Mar. 31
15000
85800
57200
158000
Final Payment to partners - March 31
15000
85800
57200
158000
Ending Balance - march 31
0
0
0
0
Cash Balance
Balance - Mar. 01
9000
Collection of Machinery & Equipment
157000
Total cash Balance
166000
Less:
Payment of liquidation expense
8000
Total Payments
8000
Cash Balance available
158000
Less: Balance required for unrecorded liabilty
Cash to be distributed to Partners
158000
Loss of Mar
Machinery & Equipment - Balance
211000
Less: Collected
157000
Loss of Machinery & equipment
54000
Payment of liquidation expense
8000
Total loss to be distributed
62000