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 terminate operations and liquidate their partnership. The trial balance at this date follows: Debit Credit Cash $ 23,000 Accounts receivable 76,000 Inventory 62,000 Machinery and equipment, net 199,000 Van, loan 40,000 Accounts payable $ 73,000 Bakel, loan 30,000 Van, capital 123,000 Bakel, capital 95,000 Cox, capital 79,000 Totals $ 400,000 $ 400,000 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: January Collected $56,000 of the accounts receivable; the balance is deemed uncollectible. Received $43,000 for the entire inventory. Paid $7,000 in liquidation expenses. Paid $65,000 to the outside creditors after offsetting a $8,000 credit memorandum received by the partnership on January 11. Retained $15,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners. February Paid $8,000 in liquidation expenses. Retained $3,000 cash in the business at the end of the month to cover additional liquidation expenses. March Received $151,000 on the sale of all machinery and equipment. Paid $10,000 in final liquidation expenses. Retained no cash in the business. Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of January. (Amounts to be deducted should be entered with a minus sign.) cash noncash assets liabilities van, capital and loan 50% bakel, capital and loan 30% cox, capital 20% balances jan 1 collected accounts receivable sold inventory paid liquidation expenses paid accounts payable subtotal (actual balances) max loss on assets max liquidation expenses subtotal (potential balances) allocation of deficit capital balance safe payment to partners Jan 31 Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of February. (Amounts to be deducted should be entered with a minus sign.) cash noncash assets liabilities van, capital and loan 50% bakel, capital and loan 30% cox, capital 20% balances before january 31 safe payments safe payments to partners jan 31 balance feb 1 paid liquidation expenses subtotal (actual balances) max loss on assets max liquidation expenses subtotal (potential balances) allocation of deficit capital balance safe payments of partners feb 28 Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of March. (Amounts to be deducted should be entered with a minus sign.) cash noncash assets liabilities van, capital and loan 50% bakel, capital and loan 30% cox, capital 20% balances before feb 28 safe payments safe payments to partners feb 28 balance march 1 sold machinery paid liquidation expenses subtotal (actual balances) safe payments to partners march 31 ending balance March 31
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
On January 1, the partners of Van, Bakel, and Cox (who share
| Debit | Credit | |||
| Cash | $ | 23,000 | ||
| 76,000 | ||||
| Inventory | 62,000 | |||
| Machinery and equipment, net | 199,000 | |||
| Van, loan | 40,000 | |||
| Accounts payable | $ | 73,000 | ||
| Bakel, loan | 30,000 | |||
| Van, capital | 123,000 | |||
| Bakel, capital | 95,000 | |||
| Cox, capital | 79,000 | |||
| Totals | $ | 400,000 | $ | 400,000 |
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:
| January | Collected $56,000 of the accounts receivable; the balance is deemed uncollectible. |
| Received $43,000 for the entire inventory. | |
| Paid $7,000 in liquidation expenses. | |
| Paid $65,000 to the outside creditors after offsetting a $8,000 credit memorandum received by the partnership on January 11. | |
| Retained $15,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners. | |
| February | Paid $8,000 in liquidation expenses. |
| Retained $3,000 cash in the business at the end of the month to cover additional liquidation expenses. | |
| March | Received $151,000 on the sale of all machinery and equipment. |
| Paid $10,000 in final liquidation expenses. | |
| Retained no cash in the business. |
Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of January. (Amounts to be deducted should be entered with a minus sign.)
cash noncash assets liabilities van, capital and loan 50% bakel, capital and loan 30% cox, capital 20%
balances jan 1
collected accounts receivable
sold inventory paid liquidation expenses
paid accounts payable
subtotal (actual balances)
max loss on assets
max liquidation expenses
subtotal (potential balances)
allocation of deficit capital balance
safe payment to partners Jan 31
Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of February. (Amounts to be deducted should be entered with a minus sign.)
cash noncash assets liabilities van, capital and loan 50% bakel, capital and loan 30% cox, capital 20%
balances before january 31 safe payments
safe payments to partners jan 31
balance feb 1
paid liquidation expenses
subtotal (actual balances)
max loss on assets
max liquidation expenses
subtotal (potential balances)
allocation of deficit capital balance
safe payments of partners feb 28
Prepare proposed schedule of liquidation to determine the safe payments made to the partners at the end of March. (Amounts to be deducted should be entered with a minus sign.)
cash noncash assets liabilities van, capital and loan 50% bakel, capital and loan 30% cox, capital 20%
balances before feb 28 safe payments
safe payments to partners feb 28
balance march 1
sold machinery
paid liquidation expenses
subtotal (actual balances)
safe payments to partners march 31
ending balance March 31
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 6 images
