Question

On June 1, 2018, the partners of Julia, Katherine, and Nicky (who shared profits and losses in the ratio of 4:4:2, respectively) decided to liquidate their partnership. The trial balance at this date was as follows: Credit Debit $35,100 128,700 101,400 368,550 58,500 Cash Accounts Receivable inventory Machinery and equipment, net Katherine, Loan Accounts payable Julia, loarn Julia, capital Katherine, capital Nicky, capital $103,350 39,000 175,500 230,100 144,300 692,250 $692,250 Total The partners planned a program of piecemeal conversion of the business assets to minimize liquidation losses. All available cash, less an amount retained to provide for future expenses, was to be distributed to the partners at the end of each month. A summary of liquidation transactions during July follows: 1. $99,450 was collected on the accounts receivable: the balance was deemed to be uncollectible. 2. $74,100 was received for the entire inventory. 3. S3,900 in liquidation expenses were paid 4. S97,500 was paid to outside creditors, after receiving a $5,850 credit memo from a creditor. 5. Cash of $19,500 was retained at the end of the month to cover unrecorded liabilities and anticipated expenses. The safe payment of cash was distributed to the partners. Requirements (I) Calculate the actual loss for July and potential liquidation loss. (2) Calculate the safe payments to be made to the partners at the end of July.

Answer 1

Actual Loss
Bad Debt (Account Receivables) (128700 - 99450)	29250
Loss due to Inventory sold (101400 - 74100)	27300
Gain resulting from credit memorandum reducing liability to creditors (103350 - 97500)	-5850
Liquidation Expenses	3900
Total Actual Loss	54600
Potential Loss
Machinery & Equipment	368550
Potential Unrecorded liabilities	19500
Total Actual Loss	388050

	Julia	Katherine	Nicky	Total
Profit Share	40%	40%	20%	100%
Preliquidation Capital Balance	175500	230100	144300	549900
Add/(Less) Loans	39000	-58500	0	-19500
	214500	171600	144300	530400
Actual Loss in July	-21840	-21840	-10920	-54600
	192660	149760	133380	475800
Potential loss	-155220	-155220	-77610	-388050
	37440	-5460	55770	87750
Potential Loss - Katherine Deficit Balance Julia (4/6); Nicky (2/6)	-3640	5460	-1820	0
Safe payment	33800	0	53950	87750