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Installment liquidation: takes place for several months to complete, and periodic or installment payments are made to the partners during the liquidation period because they require funds for personal purposes. Most
Instalment liquidations involve a distribution of cash to partners before complete liquidation of assets occurs, they are two methods for ensuring fairness and equality in making cash distributions (1) safe payment schedule and (2) cash distribution plan.
A safe payment schedule determines what amounts may be safely distributed to which partner without violating any of the principles of liquidation.
the statement of partnership realization and liquidation with a safe payment schedule for the two month liquidation period.
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Explanation of Solution
ABC partnership
Statement of realization and liquidation
From January 1, 20X1 to March 31, 20X1
Capital | ||||||
Cash | Assets | liabilities | A 50% | B 30% | C 20% | |
Balance before liquidation | 18,000 | 307,000 | 53,000 | 88,000 | 110,000 | 74,000 |
Transaction in January | ||||||
Collection of receivable at loss $15,000 | 51,000 | (66,000) | (7,500) | (4,500) | (3,000) | |
Sale of inventory at loss $14,000 | 38,000 | (52,000) | (7,000) | (4,200) | (2,800) | |
Liquidation expenses | (2,000) | (1,000) | (600) | (400) | ||
Share of credit memo | (3,000) | (1,500) | (900) | (600) | ||
Payments to creditors | (50,000) | (50,000) | ||||
55,000 | 189,000 | 0 | 74,000 | 101,600 | 68,400 | |
Safe payment schedule 1 | (45,000) | (26,600) | (18,400) | |||
10,000 | 189,000 | 0 | 74,000 | 75,000 | 50,000 | |
Transactions February | ||||||
Liquidation expenses | (4,000) | (2,000) | (1,200) | (800) | ||
6,000 | 189,000 | 0 | 72,000 | 73,800 | 49,200 | |
Safe payment schedule 2 | 0 | 0 | 0 | 0 | 0 | 0 |
Balance February | 6,000 | 189,000 | 0 | 72,000 | 73,800 | 49,200 |
March transactions | ||||||
Sale of M&Eq at loss | 146,000 | (189,000) | (21,500) | (12,900) | (8,600) | |
Liquidation expenses | (5,000) | (2,500) | (1,500) | (1,000) | ||
147,000 | 0 | 0 | 48,000 | 59,400 | 39,600 | |
Payment to partners | (147,000) | 0 | 0 | (48,000) | (59,400) | (39,600) |
Balance March 31 | 0 | 0 | 0 | 0 | 0 | 0 |
Safe payment schedule for the month:
A 50% | B 30% | C 20% | |
Schedule 1 January | |||
Capital balances | 74,000 | 101,600 | 68,400 |
Possible losses: | |||
Other assets and liquidation cost (189,000 + 10,000) | (99,500) | (59,700) | (39,800) |
25,500 | 41,900 | 28,600 | |
Absorption of A’s potential deficit | (25,500) | ||
B $25,500 x 3/5 | 15,300 | ||
C 25,500 x 2/5 | 10,200 | ||
0 | 26,600 | 18,400 | |
Schedule 2 February | |||
Capital balances | 72,000 | 73,800 | 49,200 |
Possible loss | |||
Other assets and liquidation cost (189,000 + 6,000) | (97,500) | (58,500) | (39,000) |
(25,500) | 15,300 | 10,200 | |
Absorption of A’s potential deficit | 25,500 | ||
B 25,500 x 3/5 | (15,300) | ||
C 25,500 x 2/5 | (10,200) | ||
Safe payment February | 0 | 0 | 0 |
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Chapter 16 Solutions
ADVANCED FINANCIAL ACCT.(LL) >CUSTOM<
- The following were selected from among the transactions completed by Babcock Company during November of the current year: Nov. 3 Purchased merchandise on account from Moonlight Co., list price $85,000, trade discount 25%, terms FOB destination, 2/10, n/30. 4 Sold merchandise for cash, $37,680. The cost of the goods sold was $22,600. 5 Purchased merchandise on account from Papoose Creek Co., $47,500, terms FOB shipping point, 2/10, n/30, with prepaid freight of $810 added to the invoice. 6 Returned merchandise with an invoice amount of $13,500 ($18,000 list price less trade discount of 25%) purchased on November 3 from Moonlight Co. 8 Sold merchandise on account to Quinn Co., $15,600 with terms n/15. The cost of the goods sold was $9,400. 13 Paid Moonlight Co. on account for purchase of November 3, less return of November 6. 14 Sold merchandise with a list price of $236,000 to customers who used VISA and who redeemed $8,000 of pointof- sale coupons. The cost…arrow_forwardHello teacher please solve this questionsarrow_forwardHelp me to solve this questionsarrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
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