Question

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 liquidate their partnership. The trial balance at this date follows:

	Debit		Credit
Cash	$	30,000
Accounts receivable		90,000
Inventory		76,000
Machinery and equipment, net		213,000
Van, loan		54,000
Accounts payable			$	81,000
Bakel, loan				44,000
Van, capital				150,000
Bakel, capital				102,000
Cox, capital				86,000
Totals	$	463,000	$	463,000

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 $63,000 of the accounts receivable; the balance is deemed uncollectible.
	Received $50,000 for the entire inventory.
	Paid $6,000 in liquidation expenses.
	Paid $74,000 to the outside creditors after offsetting a $7,000 credit memorandum received by the partnership on January 11.
	Retained $22,000 cash in the business at the end of January to cover any unrecorded liabilities and anticipated expenses. The remainder is distributed to the partners.
February	Paid $7,000 in liquidation expenses.
	Retained $10,000 cash in the business at the end of the month to cover unrecorded liabilities and anticipated expenses.
March	Received $158,000 on the sale of all machinery and equipment.
	Paid $9,000 in final liquidation expenses.
	Retained no cash in the business.

Prepare a schedule to compute the safe installment payments made to the partners at the end of each of these three months. (Do not round intermediate calculations.)

Answer 1

Safe Installment Payments to Partners 31 jan Schedule 1 Computation of Actual and Potential Liquidation Losses Jan Van Bakel Total Actual Potential 3 Profit and loss ratio 27,000.00 $26,000.00 S 6,000.00 $ 96,000.00 $146,000.00 86,000.00 328,000.00 Gain resulting from reducing liability to creditors (7,000.00) Collection of accounts receivable 5 Preliquidation capital balances 6 Add (deduct) loans 150,000.00 $102,000.00 $86,000.00 338,000.00 Sale of inventory $ (54,000.0044,000.0010,000.00 Liquidation expenses (26,000.00) s (15,600.00) (10400.00) (52,000.00) Machinery and equipment, net 70,000.00 $130,400.00 75,600.00 $276,000.00 unrecorded liabilities and anticipated expenses $213,000.00 8 January losses (Schedule 1) 9 Equity of partnership 31-01 10 Potential losses (Schedule 1) $(117500.00(70,500.00 $(47,000.00235,000.00 Totals (47,500.00) 59,900.00 $ 28,600.00 41,000.00 s 47,500.00 s(28,500.001 $(19,000.00 S 31400.00900.0041000.00 12 Potential loss-Van's deficit balance 13 Safe payments to partners 14 15 16 Equity of partnership-January 31, 17 Safe payments Safe Installment Payments to Partners 28 Feb Bakel Total Safe Installment Payments to Partners 31 mar $ 70,000.00 $130,400.00 75,600.00 $ 276,000.00 $(31,400.00) $ (9,600.00) (41,000.00 Equity of partnership February 28, (3,500.00)12100.001400.00(7000.00 fe payments $ 66,500.00 , $ 96,900.00 、$ 64,600.00 $ 228,000.00 Loss on sale of machinery and equipment $ (5,000.00(3,000.00) (2,000.00) (10,000.00iquidation expenses S 66,500.00 $ 96,900.00 64,600.00 $228,000.00 $(3,000.00) $ (,000.00 (5,000.00) (27,500.00)$(16,500.00) $(11,000.00) $ (55,000.00) (4,500.00(2,700.00(1,800.00 (9,000.00) y liquidation expenses 19 Equity of partnership- 28-02 20 Potential liabilities and expenses 21 Potential loss on machinery and equipment $ (106,500.00S (63,900.00 $(42,600.00$(213,000.00 Safe payments to partners $ (45,000.00) 30,000.00 20,000.00 5,000.00 $45,000.00$(27000.00) $ (18,000.00) 23 Potential loss-Van's deficit balance 24 Safe payments to partners 25 ctivate Win