On January 1, the partners of Mori, Lux, and Khan (who share profits and losses in the ratio of 5:3:2, respectively) decide to terminate operations and liquidate their partnership. The trial balance at this date follows: Cash General Journal Accounts receivable Inventory Machinery and equipment, net Mori, loan Accounts payable Lux, loan Mori, capital Lux, capital Khan, capital Totals Debit $ 25,000 80,000 Credit 66,000 226,000 44,000 $ 81,000 34,000 125,000 97,000 81,000 Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of January. Note: Amounts to be deducted should be entered with a minus sign. MORI, LUX, AND KHAN PARTNERSHIP Proposed Schedule of Liquidation Cash January 31 Noncash Assets Liabilities Mori, Capital Lux, Capital and Loan and Loan 50% 30% Khan, Capital 20% $ 418,000 $ 418,000 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: Balances - January 1 Collected accounts receivable Sold inventory January February March Required: Collected $58,000 of the accounts receivable; the balance is deemed uncollectible. Received $45,000 for the entire inventory. Paid $9,000 in liquidation expenses. Paid $68,000 to the outside creditors after offsetting a $9,000 credit memorandum received by the partnership on January 11. Retained $17,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners. Paid $10,000 in liquidation expenses. Retained $5,000 cash in the business at the end of the month to cover additional liquidation expenses. Received $153,000 on the sale of all machinery and equipment. Paid $12,000 in final liquidation expenses. Retained no cash in the business. Prepare proposed schedules of liquidation on January 31, February 28, and March 31 to determine the safe payments made to the partners at the end of each of these three months. Paid liquidation expenses Paid accounts payable Subtotal (actual balances) Maximum loss on assets Maximum liquidation expenses Subtotal (potential balances) Allocation of deficit capital balance Safe payments to partners - January 31 $ 25,000 $372,000 $ 81,000 $ 81,000 $ 131,000 $ 81,000 58,000 45,000 128,000 372,000 81,000 81,000 131,000 81,000 128,000 372,000 $ 81,000 81,000 131,000 81,000 $ 128,000 $372,000 $ 81,000 $ 81,000 $ 131,000 $ 81,000 Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of February. Note: Amounts to be deducted should be entered with a minus sign. MORI, LUX, AND KHAN PARTNERSHIP Proposed Schedule of Liquidation February 28 Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of March. Note: Amounts to be deducted should be entered with a minus sign. MORI, LUX, AND KHAN PARTNERSHIP Proposed Schedule of Liquidation March 31 Cash Noncash Assets Liabilities Mori, Capital and Loan 50% Lux, Capital and Loan 30% Khan, Capital 20% Balances before January 31 safe payments Safe payments to partners - January 31 Balances - February 1 Paid liquidation expenses Subtotal (actual balances) "Maximum loss on assets "Maximum liquidation expenses Cash Noncash Assets Mori, Liabilities Capital and Loan 50% Lux, Capital and Loan 30% Khan, Capital 20% Balances before February 28 safe payments 0 0 0 0 0 Safe payments to partners - February 28 0 0 0 Balances - March 1 0 0 0 0 0 0 0 Sold machinery Paid liquidation expenses Subtotal (potential balances) 0 0 0 0 0 0 Subtotal (actual balances) 0 0 0 0 0 Allocation of deficit capital balance Safe payments to partners - March 31 Safe payments to partners - February 28 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Ending balances - March 31 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0

On January 1, the partners of Mori, Lux, and Khan (who share profits and losses in the ratio of 5:3:2, respectively) decide to terminate operations and liquidate their partnership. The trial balance at this date follows: Cash General Journal Accounts receivable Inventory Machinery and equipment, net Mori, loan Accounts payable Lux, loan Mori, capital Lux, capital Khan, capital Totals Debit $ 25,000 80,000 Credit 66,000 226,000 44,000 $ 81,000 34,000 125,000 97,000 81,000 Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of January. Note: Amounts to be deducted should be entered with a minus sign. MORI, LUX, AND KHAN PARTNERSHIP Proposed Schedule of Liquidation Cash January 31 Noncash Assets Liabilities Mori, Capital Lux, Capital and Loan and Loan 50% 30% Khan, Capital 20% $ 418,000 $ 418,000 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: Balances - January 1 Collected accounts receivable Sold inventory January February March Required: Collected $58,000 of the accounts receivable; the balance is deemed uncollectible. Received $45,000 for the entire inventory. Paid $9,000 in liquidation expenses. Paid $68,000 to the outside creditors after offsetting a $9,000 credit memorandum received by the partnership on January 11. Retained $17,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners. Paid $10,000 in liquidation expenses. Retained $5,000 cash in the business at the end of the month to cover additional liquidation expenses. Received $153,000 on the sale of all machinery and equipment. Paid $12,000 in final liquidation expenses. Retained no cash in the business. Prepare proposed schedules of liquidation on January 31, February 28, and March 31 to determine the safe payments made to the partners at the end of each of these three months. Paid liquidation expenses Paid accounts payable Subtotal (actual balances) Maximum loss on assets Maximum liquidation expenses Subtotal (potential balances) Allocation of deficit capital balance Safe payments to partners - January 31 $ 25,000 $372,000 $ 81,000 $ 81,000 $ 131,000 $ 81,000 58,000 45,000 128,000 372,000 81,000 81,000 131,000 81,000 128,000 372,000 $ 81,000 81,000 131,000 81,000 $ 128,000 $372,000 $ 81,000 $ 81,000 $ 131,000 $ 81,000 Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of February. Note: Amounts to be deducted should be entered with a minus sign. MORI, LUX, AND KHAN PARTNERSHIP Proposed Schedule of Liquidation February 28 Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of March. Note: Amounts to be deducted should be entered with a minus sign. MORI, LUX, AND KHAN PARTNERSHIP Proposed Schedule of Liquidation March 31 Cash Noncash Assets Liabilities Mori, Capital and Loan 50% Lux, Capital and Loan 30% Khan, Capital 20% Balances before January 31 safe payments Safe payments to partners - January 31 Balances - February 1 Paid liquidation expenses Subtotal (actual balances) "Maximum loss on assets "Maximum liquidation expenses Cash Noncash Assets Mori, Liabilities Capital and Loan 50% Lux, Capital and Loan 30% Khan, Capital 20% Balances before February 28 safe payments 0 0 0 0 0 Safe payments to partners - February 28 0 0 0 Balances - March 1 0 0 0 0 0 0 0 Sold machinery Paid liquidation expenses Subtotal (potential balances) 0 0 0 0 0 0 Subtotal (actual balances) 0 0 0 0 0 Allocation of deficit capital balance Safe payments to partners - March 31 Safe payments to partners - February 28 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Ending balances - March 31 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter12: Accounting For Partnerships And Limited Liability Companies

Section: Chapter Questions

Problem 4PB

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