Installment liquidation, schedule of safe payments, capital contributions. Ziegler, Nola...

Installment liquidation, schedule of safe payments, capital contributions. Ziegler, Nolan, and Petersen are partners in a residential construction business that has operated for the last 32 years in the Los Angeles area. The partners have decided to leave the business and focus on other pursuits. Initially, they had hoped to sell the business to an employee or other construction company. However, the weak housing market in the area has made liquidation of the company a more likely scenario.

You have been retained to account for the liquidation and to advise the partners as to how available assets of the company should be distributed. Events surrounding the liquidation during 2018 are as follows:

a. On June 1, the company’s balance sheet reflected the following: cash—$12,000; noncash assets—$228,000; liabilities to nonpartners—$120,000; loan payable to Nolan—$15,000; Ziegler, capital—$20,000; Nolan, capital—$35,000; and Petersen, capital—$50,000. Ziegler, Nolan, and Petersen share profits and losses of 30%, 30%, and 40%, respectively.

b. A review of the financial statements reveals that additional adjustments may be in order. The company has a contingent liability associated with a previous building contract dispute. It is probable that the company will incur $13,000 of cost in connection with this matter. Final wages and related payroll tax liabilities totaling $4,400 have not been accrued.

c. On June 15, vehicles with a current value of $23,000 and a book value of $14,000 were conveyed to Ziegler. Other assets with a book value of $90,000 were sold for $70,000 to a competing contractor. All available cash was distributed.

d. On June 30, inventory, tools, and other equipment were sold to various employees for a total of $92,000. The items had a book value of $80,000.

e. On July 10, a subcontractor was paid $15,000 to complete work on a final construction project that had not been finished prior to the liquidation. The customer was billed $20,000 for the work performed, and final payment was expected by late July.

f. On July 15, available cash was distributed. However, in addition to the $13,000 of cash retained to satisfy the contingent liability, another $5,000 of cash was retained as a precaution.

g. On July 25, title to a vehicle with a fair value of $12,000 and a book value of $8,000 was transferred to Petersen.

h. At the end of July, the contingent liability was settled for $10,000, and $20,000 was received from the last customer in payment for services performed in July.

i. On August 1, all available cash was distributed.

j. At mid-August, all the remaining assets were disposed of for $24,000. Associated attorney and accounting fees of $6,000 were paid. All available cash was distributed.

After all of the above events, the personal financial statements of the partners reveal the following: