On January 1, 20X1, partners Art, Bru, and Chou, who share profits and losses in the ratio of 5:3:2, respectively, decide to liquidate their partnership. The partnership trial balance at this date follows:
Debit Credit
Cash $ 18,200
Accounts Receivable 66,500
Inventory 52,500
Machinery and Equipment (net) 189,500
Accounts Payable $ 53,200
Art, Capital 88,500
Bru, Capital 110,500
Chou, Capital 74,500
Total $ 326,700 $ 326,700
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 follows:
January 20X1
Collected $51,400 on accounts receivable; the balance is uncollectible.
Received $38,300 for the entire inventory.
Paid $2,100 liquidation expenses.
Paid $51,200 to creditors, after offset of a $2,000 credit memorandum received on January 11, 20X1.
Retained $10,200 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses.
February 20X1
Paid $4,100 liquidation expenses.
Retained $6,100 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses.
March 20X1
Received $146,400 on sale of all items of machinery and equipment.
Paid $5,100 liquidation expenses.
Retained no cash in the business.
Required:
Prepare a statement of partnership liquidation for the partnership with schedules of safe payments to partners. (Round your answers to nearest whole dollar.)
ABC PARTNERSHIP
Statement of Partnership Realization and Liquidation
For the period from January 1, 20X1, through March 31, 20X1
Capital Balances
Cash Other Assets Accounts Payable Art Bru Chou
Balances before liquidation, January 1, 20X1
January transactions:
Collection of accounts receivable at a loss
Sale of inventory at a loss
Liquidation expenses paid
Share of credit memorandum
Payments to creditors
Safe payments to partners
February transactions:
Liquidation expenses paid
Safe payments to partners
March transactions:
Sale of M&Eq. at a loss
Liquidation expenses paid
Payments to partners
Balances at end of liquidation, March 31, 20X1
ABC PARTNERSHIP
Schedule of Safe Payments to Partners
Art 50% Bru 30% Chou 20%
Schedule 1: January 31, 20X1
Capital balances
Potential Loss on noncash assets
Allocation of potential deficit
Safe payment, January 31, 20X1
Schedule 2: February 27, 20X1
Capital balances
Potential Loss on noncash assets
Allocation of potential deficit
Safe payment, February 27, 20X1