1 20X1 partners Art Bru and Chou who share profits and losse

1, 20X1, partners Art, Bru, and Chou, who share profits and losses in the ratio of 6.31, respectively, decide to liquidate their partnership. The partnership trial balance at this date follows: Debit 20,400 Cash Accounts Receivable Inventory Machinery and Equipment (net) Accounts Payable Art, Capital Bru, Capital Chou, Capital Total 2,000 58,000 195,000 $ 55,400 94,000 116,000 80,000 345,400 $345, 400 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 1. Collected $55,800 on accounts receivable; the balance is uncollectible. 2. Recelved $41,600 for the entire inventory. 3. Paid $3,200 liquidation expenses. 4. Paid $51,600 to creditors, after offset of a $3,800 credit memorandum received on January 11, 20X1 5. Retained $12,400 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses. February 20x1 6. Paid $5,200 liquidation expenses 7, Retained $7.200 cash in the business at the end of the month for potential unrecorded liabilities and anticipated expenses. March 20X1 8. Received $151,200 on sale of all items of machinery and equipment 9. Paid $6,200 liquidation expenses. 10. Retained no cash in the business

Solution

ABC Partnership Statement of Partnership Realization and Liquidation For the Period from January 1,20X1, through March 31,20X1 Cash Other assets Accounts Payable Art\'s Capital Bru\'s Capital Chou\'s Capital Balance before liquidation on 1st Jan ,20X1 20400 325000 -55400 -94000 -116000 -80000 Collection from Accounts Receivable after loss of ($72000-$55800)=$16200 55800 -72000 9720 4860 1620 Collection from sale of Inventory($58000-$41600)=$16400 41600 -58000 9840 4920 1640 Liquidation Expenses Paid -3200 1920 960 320 Credit Memorandum 3800 -2280 -1140 -380 Payment to Creditors -51600 51600 63000 195000 0 -74800 -106400 -76800 Safe Payment to Partners(63000-$12400) -50600 37950 12650 12400 195000 0 -74800 -68450 -64150 Feb Transactions Liquidation Expenses Paid -5200 3120 1560 520 Safe Payment to Partners 0 0 0 0 7200 195000 -71680 -66890 -63630 March transactions Received $151200 for sale of Equipment on loss of ($195000-$151200) 151200 -195000 26280 13140 4380 Liquidation Expenses Paid -6200 3720 1860 620 152200 0 -41680 -51890 -58630 Payment to Partners -152200 41680 51890 58630 Balance at the end of liquidation,March31st 0 0 0 0 0 ABC Partnership Schedule of safe payment to Partners Art\'s Capital Bru\'s Capital Chou\'s Capital Capital balances $     -74,800.00 $      -1,06,400.00 $    -76,800.00 Possible Loss:(Other assets $195000and possible liquidation expenses $12400)=Art\'s Capital=($207400*6/10),Bru\'s Capital=($207400*3/10),Chou\'s Capital=($207400*1/10) $   1,24,440.00 $            62,220.00 $     20,740.00 $      49,640.00 $          -44,180.00 $    -56,060.00 Deficit of Art\'s Capital $     -49,640.00 Bru\'s Capital($49640*3/4) $            37,230.00 Chou\'s Capital($49640*1/10) $     12,410.00 Safe Payment on January 31st, 20X1 $                      -   $            -6,950.00 $    -43,650.00 Capital balances $     -71,680.00 $          -66,890.00 $    -63,630.00 Possible Loss:(Other assets $195000and possible liquidation expenses $7200) $   1,21,320.00 $            60,660.00 $     20,220.00 $      49,640.00 $            -6,230.00 $    -43,410.00 Deficit of Art\'s $     -49,640.00 $              6,230.00 $     43,410.00 Safe Payment on February 27th, 20X1 $                      -   $                           -   $                     -