Installment liquidation: takes place for several months to complete, and periodic or installment payments are made to the partners during the liquidation period because they require funds for personal purposes. Most
Instalment liquidations involve a distribution of cash to partners before complete liquidation of assets occurs, they are two methods for ensuring fairness and equality in making cash distributions (1) safe payment schedule and (2) cash distribution plan.
A safe payment schedule determines what amounts may be safely distributed to which partner without violating any of the principles of liquidation.
the statement of partnership realization and liquidation with a safe payment schedule for the two month liquidation period.
Explanation of Solution
ABC partnership
Statement of realization and liquidation
From January 1, 20X1 to March 31, 20X1
Capital | ||||||
Cash | Assets | liabilities | A 50% | B 30% | C 20% | |
Balance before liquidation | 18,000 | 307,000 | 53,000 | 88,000 | 110,000 | 74,000 |
Transaction in January | ||||||
Collection of receivable at loss $15,000 | 51,000 | (66,000) | (7,500) | (4,500) | (3,000) | |
Sale of inventory at loss $14,000 | 38,000 | (52,000) | (7,000) | (4,200) | (2,800) | |
Liquidation expenses | (2,000) | (1,000) | (600) | (400) | ||
Share of credit memo | (3,000) | (1,500) | (900) | (600) | ||
Payments to creditors | (50,000) | (50,000) | ||||
55,000 | 189,000 | 0 | 74,000 | 101,600 | 68,400 | |
Safe payment schedule 1 | (45,000) | (26,600) | (18,400) | |||
10,000 | 189,000 | 0 | 74,000 | 75,000 | 50,000 | |
Transactions February | ||||||
Liquidation expenses | (4,000) | (2,000) | (1,200) | (800) | ||
6,000 | 189,000 | 0 | 72,000 | 73,800 | 49,200 | |
Safe payment schedule 2 | 0 | 0 | 0 | 0 | 0 | 0 |
Balance February | 6,000 | 189,000 | 0 | 72,000 | 73,800 | 49,200 |
March transactions | ||||||
Sale of M&Eq at loss | 146,000 | (189,000) | (21,500) | (12,900) | (8,600) | |
Liquidation expenses | (5,000) | (2,500) | (1,500) | (1,000) | ||
147,000 | 0 | 0 | 48,000 | 59,400 | 39,600 | |
Payment to partners | (147,000) | 0 | 0 | (48,000) | (59,400) | (39,600) |
Balance March 31 | 0 | 0 | 0 | 0 | 0 | 0 |
Safe payment schedule for the month:
A 50% | B 30% | C 20% | |
Schedule 1 January | |||
Capital balances | 74,000 | 101,600 | 68,400 |
Possible losses: | |||
Other assets and liquidation cost (189,000 + 10,000) | (99,500) | (59,700) | (39,800) |
25,500 | 41,900 | 28,600 | |
Absorption of A’s potential deficit | (25,500) | ||
B $25,500 x 3/5 | 15,300 | ||
C 25,500 x 2/5 | 10,200 | ||
0 | 26,600 | 18,400 | |
Schedule 2 February | |||
Capital balances | 72,000 | 73,800 | 49,200 |
Possible loss | |||
Other assets and liquidation cost (189,000 + 6,000) | (97,500) | (58,500) | (39,000) |
(25,500) | 15,300 | 10,200 | |
Absorption of A’s potential deficit | 25,500 | ||
B 25,500 x 3/5 | (15,300) | ||
C 25,500 x 2/5 | (10,200) | ||
Safe payment February | 0 | 0 | 0 |
Want to see more full solutions like this?
Chapter 16 Solutions
ADVANCED FINANCIAL ACCOUNTING-ACCESS
- What will i do for the liquidation expense stated in the problem related to parnership liquidation installment - cash priority program? Problem: On January 1, 2022, partners Kho, Lagman and Magno decided to liquidate their partnership. Prior to the liquidation, the partnersip had cash of P12,000, non-cash assets of P146,000, liabilities to outsiders of P36,000 and a note payable to Partner Magno of P14,000. The capital balances of the partners were: Kho - P36,000; Lagman-P54,000; Magno-P18,000. The partners share profits and losses in the ratio of 3:3:4,respectively.During January 2022, the partnership received cash of P30,000 from the sale of assets with a book value of P38,000 and paid P3,600 of liquidation expenses. During February, the partnership realized P44,000-from the sale of assets with a book value of P35,000 and paid liquidation expenses of P8,400. During March, the remaining assets were sold for P36,000. The partners agreed to distribute cash at the end of each…arrow_forwardPartnership Dissolution 1. The partnership of A, B, & C agree to sell D one-fourth of their respective capital and profit and loss interest in exchange for a total payment of P20,000. The partners capital balances and profit and loss ratio are as follows: A (60%), P50,000; B (30%), P40,000; C (10%), P 20,000. If assets are to be revalued prior to the admission of D, how much is the capital balances of A, B, C after admission of D? 2.The computation of sale or settlement of the share or interest in a partnership is the same in retirement, withdrawal, insolvency/incapacity and death of any of the partners if: a. If the sale or settlement is approved by all the remaining partners. b. If sale or settlement is approved by the retiring, withdrawing partner or his administrator in case of death or incapacity. c. The partners have equal interest in the partnership. d. All facts and circumstances are the same and the only distinction is the reason for disassociation. 3.Va and Vo form a…arrow_forwardCapital balances of partners Q,R, S are the following before liquidation: P87,000, P95,500, P106,250 respectively. The partnership has a loan from partner Q in the amount of P8,000; loan to partner R in the amount of P4,500; advances to partner S in the amount of P6,500. The partners’ profit and loss ratio is 25:40:35 respectively. If in the first installment the total cash paid to partners is P57,000, how much did partner S receive?arrow_forward
- On December 31, 2020, the partners of A, B & C LLP, who shared net income and losses in the ratio of 5 : 3 : 2, respectively, decided to liquidate the partnership. The partnership trial balance on that date was as follows: A, B & C LLP Trial Balance, December 31, 2020 Debit S 18,000 30,000 Credit Cash Loan receivable from A Trade accounts receivable (net) Inventories Machinery and equipment (net) Trade accounts payable Loan payable to B А, саpital В саpital С, сарital Totals The partners planned a lengthy time period for realization of noncash assets in order to minimize liquidation losses. All available cash, less an amount retained to provide for future liquidation costs, was to be distributed to the partners at the end of each month. Prepare a cash distribution program for A, B &C LLP on December 31, 2020, showing how cash should be distributed to creditors and to partners as it becomes available during liquidation. Round amounts to the nearest dollar. 66,000 52,000 189,000 $ 53,000…arrow_forwardOn December 31, 2019, the balance sheet for the XYZ Partnership follows: The percentages shown are for the residual profit and loss sharing ratios. The partners dissolved the partnership on January 1, 2020 and began the liquidation process. During January the following events occurred: Receivables of P7,500 were collected. All inventory was sold for P10,000. All available cash was distributed on January 31, 2020, except for P5,000 that was set aside for contingent expenses. How much cash would Xander receive from the cash that is available for distribution on January 31?arrow_forwardThe CDG Carlos, Dan, and Gall Partnership has decided to liquidate as of December 1, 20X6. A balance sheet on the date follows: Assets Cash Accounts Receivable (net) Inventories Property, Plant and Equipment (net) Total Assets Liabilities and Capital Liabilities: Accounts Payable Capital: CDG PARTNERSHIP Balance Sheet At December 1, 20x6 Carlos, Capital Dan, Capital Gail, Capital Total Capital Total Liabilities and Capital $138,000 68,000 78,000 Personal assets Personal liabilities Personal net worth $ 34,000 93,000 118,000 336,000 $581,000 $297,000 284,000 $581,000 Additional Information 1. Each partner's personal assets (excluding partnership capital interests) and personal liabilities as of December 1, 20X6, follow: Carlos Dan Gail $ 268,000 $310,000 $368,000 (239,000) (231,000) (340,000) $ 87,000 $ 28,000 $ 29,000 2. Carlos, Dan, and Gall share profits and losses in the ratio 15:45:40, 3. CDG sold all noncash assets on December 10, 20X6, for $276,000.arrow_forward
- Liquidating Partnerships Prior to liquidating their partnership, Cameron and Solivita had capital accounts of $44,000 and $92,000, respectively. Prior to liquidation, the partnership had no cash assets other than what was realized from the sale of assets. These partnership assets were sold for $166,000. The partnership had $9,000 of liabilities. Cameron and Solivita share income and losses equally. Determine the amount received by Cameron as a final distribution from liquidation of the partnership.arrow_forwardPARTNERSHIP DISSOLUTION On December 31, 2020, the Statement of Financial Position of SAIYAN Partnership provided the following data with profit or loss ratio of 1:6:3: Current Assets P1,000,000 Total Liabilities P600,000 Non-Current Assets P2,000,000 Goku, Capital P900,000 Vegeta, Captal Gohan, Capital P800,000 P700,000 On January 01, 2021, Trunks is admitted to the partnership by purchasing 40% of the capital interest of Vegeta at a price of P500,000. 13. What is the capital balance of Vegeta after the admission of Trunks on January 01, 2021? On December 31, 2018, PRESIDENTIAL PARTNERSHIP's Statement of Financial Position shows MARCOS ROBREDO and MORENO have capital balances of P500,000, P300,000 and P200,000 with profit or loss ratio of 1:3:6. On January 01, 2019, MORENO retired from the partnership and received 350,000 at the time of MORENO's retirement, an asset of the partnership is undervalued. 14. What is the capital balance of MARCOS after the retirement of MORENO? On December…arrow_forward10. On October 1, A and B pooled their assets to form a Partnership, with the firm to take over the business assets and assume liabilities. Partners capitals are to be based on net assets transferred after the following adjustments. The partners agreed to the following adjustments: A’s inventory is to be increased by P15,000, while B’s inventory has a current fair market value of P100,000 and an agreed value of P110,000. B’s unadjusted inventory amounted to P90,000. Machinery and equipment are over-depreciated by P5,000 and P8,000 for A and B, respectively. Furnitures and fixtures for partner A has a current fair market value of P60,000 and an agreed value of P50,000. Furnitures and fixtures is carried at its cost amounting to P100,000 with accumulated depreciation of P45,000. Accrued rent income of P10,000 for A, and accrued salaries of P5,000 for B should be recognized on their respective books. The individual trial balances on October 1, before adjustments, follow: DESCRIPTION…arrow_forward
- A partnership has the following account balances at the date of termination: Cash, $80,000; Noncash Assets, $660,000; Liabilities, $320,000; Bell, capital (50 percent of profits and losses), $200,000; Mann, capital (30 percent), $120,000; Scott, capital (20 percent), $100,000. The following transactions occur during liquidation: Noncash assets with a book value of $500,000 are sold for $400,000 in cash. A creditor reduces his claim against the partnership from $120,000 to $100,000, and this amount is paid in cash. The remaining noncash assets are sold for $130,000 in cash. The remaining liabilities of $200,000 are paid in full. Liquidation expenses of $24,000 are paid in cash. Cash remaining after the above transactions have occurred is distributed to the partners. Prepare a statement of partnership liquidation to determine how much cash each partner receives from the liquidation of the partnership. (Amounts to be deducted should be entered with a minus sign.)arrow_forwardA partnership has the following account balances at the date of termination: Cash, $84,000; Noncash Assets, $680,000; Liabilities, $395,000; Bell, capital (50 percent of profits and losses), $175,000; Mann, capital (30 percent), $120,000; Scott, capital (20 percent), $74,000. The following transactions occur during liquidation: Noncash assets with a book value of $520,000 are sold for $420,000 in cash. A creditor reduces his claim against the partnership from $160,000 to $140,000, and this amount is paid in cash. The remaining noncash assets are sold for $130,000 in cash. The remaining liabilities of $235,000 are paid in full. Liquidation expenses of $16,000 are paid in cash. Cash remaining after the above transactions have occurred is distributed to the partners. Prepare a statement of partnership liquidation to determine how much cash each partner receives from the liquidation of the partnership. (Amounts to be deducted should be entered with a minus sign.) Need the answer to…arrow_forwardGeorgia's Interest in the equal GFH Partnership is liquidated when the GFH Partnership makes a Liquidating Distribution to Georgia and the remaining Partners assume Georgia's share of the Partnership Liabilities. Georgia receives $12,000 in Cash, Accounts Receivable of $21,000 (Fair Market Value) and Equipment worth (Fair Market Value) of $47,000. On the date of the Liquidation, the Partnership's Cash Basis Balance Sheet reflected the following: Cash (Adjusted Basis- $60,000; Fair Market Value - $60,000); Unrealized Receivable (Adjusted Basis-S-0-; Fair Market Value - $63,000); Equipment (Adjusted Basis- $72,000; Fair Market Value - $141,000) (Total Assets: Adjusted Basis- $132,000; Fair Market Value - $264,000); Notes Payable (Adjusted Basis - $24,000; Fair Market Value - $24,000); Capital Accounts: Georgia Capital (Adjusted Basis - $36,000, Fair Market Value - $80,000); Freddie Capital (Adjusted Basis- $36,000; Fair Market Value - $80,000); Helen Capital (Adjusted Basis- $36,000;…arrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,