Installment Liquidation [AICPA Adapted]
On January 1,20X1, partners Art, Bru, and Chou, who share profits and losses in the ratio of 5:3:2, decide to liquidate their partnership. The partnership trial balance at this date is as follows:
| Debit | Credit |
Cash | $ 18,000 |
|
Accounts Receivable | 66,000 |
|
Inventory | 52,000 |
|
Machinery and Equipment (net) | 189,000 |
|
Accounts Payable |
| $ 53,000 |
Art, Capital |
| 88,000 |
Bru, Capital |
| 110,000 |
Chou, Capital |
| 74,000 |
Total | $325,000 | $325,000 |
The partners plan a program of piecemeal conversion of 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 is as follows:
January 20X1
1. $51,000 was collected on accounts receivable; the balance is uncollectible.
2. $38,000 was received for the entire inventory.
3. $2,000 liquidation expenses were paid.
4. $50,000 was paid to creditors, after offset of a $3,000 credit memorandum received on January 11, 20X1.
5. $10,000 cash was retained in the business at the end of the month for potential unrecorded liabilities and anticipated expenses.
February 20X1
6. $4,000 liquidation expenses were paid.
7. $6,000 cash was retained in the business at the end of the month for potential unrecorded liabilities and anticipated expenses.
March 20X1
8. $146,000 was received on sale of all items of machinery and equipment.
9. $5,000 liquidation expenses were paid. 10. No cash was retained in the business.
Required
Prepare a statement of partnership liquidation for the partnership with schedules of safe payments to partners.
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