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 $ 24,000 Accounts receivable 78,000 Inventory 64,000 Machinery and equipment, net 201,000 Van, loan 42,000 Accounts payable $ 77,000 Bakel, loan 32,000 Van, capital 124,000 Bakel, capital 96,000 Cox, capital 80,000 Totals $ 409,000 $ 409,000 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 $57,000 of the accounts receivable; the balance is deemed uncollectible. Received $44,000 for the entire inventory. Paid $8,000 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 $16,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners. February Paid $9,000 in liquidation expenses. Retained $4,000 cash in the business at the end of the month to cover additional liquidation expenses. March Received $152,000 on the sale of all machinery and equipment. Paid $11,000 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. VAN, BAKEL, AND COX PARTNERSHIP Proposed Schedule of Liquidation January 31 Cash Noncash Assets Liabilities Van, Capital and Loan 50% Bakel, Capital and Loan 30% Cox, Capital 20% Balances - January 1 $24,000selected answer correct not attempted 77,000selected answer correct 124,000selected answer incorrect 96,000selected answer incorrect 80,000selected answer correct Collected accounts receivable 57,000selected answer correct not attempted 0selected answer correct 124,000selected answer incorrect 96,000selected answer incorrect 80,000selected answer incorrect Sold inventory not attempted not attempted not attempted not attempted not attempted not attempted Paid liquidation expenses not attempted not attempted not attempted not attempted not attempted not attempted Paid accounts payable not attempted not attempted not attempted not attempted not attempted not attempted Subtotal (actual balances) 81,000 0 77,000 248,000 192,000 160,000 Maximum loss on assets not attempted not attempted not attempted not attempted not attempted not attempted Maximum liquidation expenses not attempted not attempted not attempted not attempted not attempted not attempted Subtotal (potential balances) 81,000 0 $77,000 248,000 192,000 160,000 Allocation of deficit capital balance not attempted not attempted not attempted not attempted not attempted not attempted Safe payments to partners - January 31 $81,000 $0 $77,000 $248,000 $192,000 $160,000

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 $ 24,000 Accounts receivable 78,000 Inventory 64,000 Machinery and equipment, net 201,000 Van, loan 42,000 Accounts payable $ 77,000 Bakel, loan 32,000 Van, capital 124,000 Bakel, capital 96,000 Cox, capital 80,000 Totals $ 409,000 $ 409,000 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 $57,000 of the accounts receivable; the balance is deemed uncollectible. Received $44,000 for the entire inventory. Paid $8,000 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 $16,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners. February Paid $9,000 in liquidation expenses. Retained $4,000 cash in the business at the end of the month to cover additional liquidation expenses. March Received $152,000 on the sale of all machinery and equipment. Paid $11,000 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. VAN, BAKEL, AND COX PARTNERSHIP Proposed Schedule of Liquidation January 31 Cash Noncash Assets Liabilities Van, Capital and Loan 50% Bakel, Capital and Loan 30% Cox, Capital 20% Balances - January 1 $24,000selected answer correct not attempted 77,000selected answer correct 124,000selected answer incorrect 96,000selected answer incorrect 80,000selected answer correct Collected accounts receivable 57,000selected answer correct not attempted 0selected answer correct 124,000selected answer incorrect 96,000selected answer incorrect 80,000selected answer incorrect Sold inventory not attempted not attempted not attempted not attempted not attempted not attempted Paid liquidation expenses not attempted not attempted not attempted not attempted not attempted not attempted Paid accounts payable not attempted not attempted not attempted not attempted not attempted not attempted Subtotal (actual balances) 81,000 0 77,000 248,000 192,000 160,000 Maximum loss on assets not attempted not attempted not attempted not attempted not attempted not attempted Maximum liquidation expenses not attempted not attempted not attempted not attempted not attempted not attempted Subtotal (potential balances) 81,000 0 $77,000 248,000 192,000 160,000 Allocation of deficit capital balance not attempted not attempted not attempted not attempted not attempted not attempted Safe payments to partners - January 31 $81,000 $0 $77,000 $248,000 $192,000 $160,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

	Debit	Credit
Cash	$	24,000
Accounts receivable		78,000
Inventory		64,000
Machinery and equipment, net		201,000
Van, loan		42,000
Accounts payable			$	77,000
Bakel, loan				32,000
Van, capital				124,000
Bakel, capital				96,000
Cox, capital				80,000
Totals	$	409,000	$	409,000

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 $57,000 of the accounts receivable; the balance is deemed uncollectible.
	Received $44,000 for the entire inventory.
	Paid $8,000 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 $16,000 cash in the business at the end of January to cover liquidation expenses. The remainder is distributed to the partners.

February	Paid $9,000 in liquidation expenses.
	Retained $4,000 cash in the business at the end of the month to cover additional liquidation expenses.

March	Received $152,000 on the sale of all machinery and equipment.
	Paid $11,000 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.

VAN, BAKEL, AND COX PARTNERSHIP
Proposed Schedule of Liquidation
January 31
	Cash	Noncash Assets	Liabilities	Van, Capital and Loan 50%	Bakel, Capital and Loan 30%	Cox, Capital 20%
Balances - January 1	$24,000selected answer correct	not attempted	77,000selected answer correct	124,000selected answer incorrect	96,000selected answer incorrect	80,000selected answer correct
Collected accounts receivable	57,000selected answer correct	not attempted	0selected answer correct	124,000selected answer incorrect	96,000selected answer incorrect	80,000selected answer incorrect
Sold inventory	not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
Paid liquidation expenses	not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
Paid accounts payable	not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
Subtotal (actual balances)	81,000	0	77,000	248,000	192,000	160,000
Maximum loss on assets	not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
Maximum liquidation expenses	not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
Subtotal (potential balances)	81,000	0	$77,000	248,000	192,000	160,000
Allocation of deficit capital balance	not attempted	not attempted	not attempted	not attempted	not attempted	not attempted
Safe payments to partners - January 31	$81,000	$0	$77,000	$248,000	$192,000	$160,000

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