Question

On September 1, 20X9, KITCHENS JUST FOR YOU agreed to dissolve and liquidate the business. They decided on an installment liquidation to complete the projects already initiated.

The balance sheet, with profit and loss–sharing percentages at the beginning of liquidation, is as follows:

KITCHENS JUST FOR YOU

Balance Sheet

September 1, 20X9

Assets​Liabilities and Equities

Cash ​ $ 12,000 ​Accounts Payable​ $ 43,000

Receivables ​63,000 ​Connie, Loan ​15,000

Terry, Loan ​ 9,000 ​Terry, Capital (30%) ​12,000

Inventory ​48,000 ​Phyllis, Capital (50%) ​36,000

Goodwill ​28,000 ​Connie, Capital (20%) ​54,000

Total Assets $160,000 ​Total Liabilities & Equities $160,000

Connie’s loan was for working capital; the loan to Terry was for his unexpected personal medical bills.

During September 20X9, the first month of liquidation, the partnership collected $41,000 in

receivables and decided to write off $12,000 of the remaining receivables. Sales of one-half of

the book value of the inventory realized a loss of $4,000. The partners estimate that the costs of

liquidating the business (newspaper ads, signs, etc.), are expected to be $6,000 for the remainder

of the liquidation process.

Required

Prepare a schedule of safe payments to partners as of September 30, 20X9, to show how the available

cash should be distributed to the partners.

2-3 Adams, Peters, and Blake share profits and losses for their APB Partnership in a ratio of 2:3:5.

When they decide to liquidate, the balance sheet is as follows:

Assets ​Liabilities and Equities

Cash ​$ 40,000​Liabilities​ $ 50,000

Adams, Loan ​ 10,000 ​Adams, Capital ​55,000

Other Assets ​ 200,000 ​Peters, Capital ​75,000

_______​Blake, Capital ​70,000​

Total Assets ​$250,000 ​Total Liabilities & Equities​ $250,000​

Liquidation expenses are expected to be negligible. No interest accrues on loans with partners after

termination of the business.

Required

Prepare a cash distribution plan for the APB Partnership.

Answer 1

(b) In this case, it is assumed that full other assets value are collected on the sale at a stretch.

For calculation ref: