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 $ 27,000 Accounts receivable 84,000 Inventory 70,000 Machinery and equipment, net 207,000 Van, loan 48,000 Accounts payable $ 89,000 Bakel, loan 38,000 Van, capital 127,000 Bakel, capital 99,000 Cox, capital 83,000 Totals $ 436,000 $ 436,000 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 $60,000 of the accounts receivable; the balance is deemed uncollectible. Received $47,000 for the entire inventory. Paid $3,000 in liquidation expenses. Paid $85,000 to the outside creditors after offsetting a $4,000 credit memorandum received by the partnership on January 11. Retained $19,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners. February Paid $4,000 in liquidation expenses. Retained $7,000 cash in the business at the end of the month to cover additional liquidation expenses. March Received $155,000 on the sale of all machinery and equipment. Paid $6,000 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.
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 | $ | 27,000 | ||
| 84,000 | ||||
| Inventory | 70,000 | |||
| Machinery and equipment, net | 207,000 | |||
| Van, loan | 48,000 | |||
| Accounts payable | $ | 89,000 | ||
| Bakel, loan | 38,000 | |||
| Van, capital | 127,000 | |||
| Bakel, capital | 99,000 | |||
| Cox, capital | 83,000 | |||
| Totals | $ | 436,000 | $ | 436,000 |
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 $60,000 of the accounts receivable; the balance is deemed uncollectible. |
| Received $47,000 for the entire inventory. | |
| Paid $3,000 in liquidation expenses. | |
| Paid $85,000 to the outside creditors after offsetting a $4,000 credit memorandum received by the partnership on January 11. | |
| Retained $19,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners. | |
| February | Paid $4,000 in liquidation expenses. |
| Retained $7,000 cash in the business at the end of the month to cover additional liquidation expenses. | |
| March | Received $155,000 on the sale of all machinery and equipment. |
| Paid $6,000 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.
Step by step
Solved in 2 steps with 2 images
