Question

On January 1, the partners of Van, Bakel, and Cox (who share profits and losses in the ratio of 5:3:2, respectively) decide to liquidate their partnership. The trial balance at this date follows:

	Debit		Credit
Cash	$	43,000
Accounts receivable		116,000
Inventory		102,000
Machinery and equipment, net		239,000
Van, loan		80,000
Accounts payable			$	98,000
Bakel, loan				70,000
Van, capital				198,000
Bakel, capital				115,000
Cox, capital				99,000
Totals	$	580,000	$	580,000

The partners plan a program of piecemeal conversion of the partnership’s 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	Collected $76,000 of the accounts receivable; the balance is deemed uncollectible.
	Received $63,000 for the entire inventory.
	Paid $3,000 in liquidation expenses.
	Paid $94,000 to the outside creditors after offsetting a $4,000 credit memorandum received by the partnership on January 11.
	Retained $35,000 cash in the business at the end of January to cover any unrecorded liabilities and anticipated expenses. The remainder is distributed to the partners.
February	Paid $4,000 in liquidation expenses.
	Retained $23,000 cash in the business at the end of the month to cover unrecorded liabilities and anticipated expenses.
March	Received $171,000 on the sale of all machinery and equipment.
	Paid $6,000 in final liquidation expenses.
	Retained no cash in the business.

Prepare a schedule to compute the safe installment payments made to the partners at the end of each of these three months. (Do not round intermediate calculations.)

VAN, BAKEL, AND COX PARTNERSHIP Safe Installment Payments to Partners January 31 Van Bakel Cox Total Profit and loss ratio % % % % Capital balances - January 1 Add (deduct) loans Adjusted capital balances - January 1 Allocation of January net loss Capital balances - January 31 Potential loss Subtotal Allocation of deficit balances Safe payments to partners - January 31

VAN, BAKEL, AND COX PARTNERSHIP Safe Installment Payments to Partners February 28 Van Bakel Cox Total Profit and loss ratio % % % % Capital balances - January 31 Safe payments - January 31 Capital balances - February 1 Allocation of February net loss Capital balances - February 28 Potential loss Subtotal Allocation of deficit balances Safe payments to partners - February 28

VAN, BAKEL, AND COX PARTNERSHIP Safe Installment Payments to Partners March 31 Van Bakel Cox Total Profit and loss ratio % % % % Capital balances - February 28 Safe payments - February 28 Capital balances - March 1 Allocation of March net loss Capital balances - March 31 Final payments to partners - March 31 Ending balances - March 31

Answer 1

CAPITAL A/CS ( $ 000’S)
	VAN	BAKEL	COX
JAN 1, BAL C/D	198	115	99
LOSS DIVIDED	163.5	98.1	65.4
BAL	34.5	16.9	33.6
CASH PAID	25	15	10
FEB LOSS DIV	4	2.4	1.6
	5.5	(.5)	22
MAR
CASH PAID	85.5	51.3	34.2
	80	50.6	12.2
TRF FROM COX TO BAKEL		12.2	(12.2)
		0	0

CASH BOOK   JANUARY
	$		$
JAN 1 BALANCE	43000	LIQ EXP	3000
ACC REC	76000	Accounts payable	94000
INVENTORY	63000	VAN	25000
		BAKEL	15000
		COX	10000
		BAL C/D	35000
	182000		182000
FEB
BAL C/D	35000	LIQ EXP	4000
		VAN	4000
		BAKEL	2400
		COX	1600
		BAL C/D	23000
	35000		35000
MAR
BAL C/D	23000	LIQ EXP	6000
MACH	171000	MACH	171000
		DIS TO VAN	94000
		BAKEL	56400
		COX	37600
	194000		194000

REALISATION JANUARY
	$		$
Accounts receivable	116000	ACC REC	76000
Inventory	102000	INVENTORY	63000
LIQ EXP	3000	Accounts payable	98000
ACC PAY PAID	94000	BAKEL LOAN	70000
MACH	239000	LOSS DIVIDED VAN	163.5
VAN	80000	BAKEL	98.1
		COX	65.4
	634		634
REALISATION FEB
LIQ EX	8	LOSS DIVIDED VAN	4
		BAKEL	2.4
		COX	1.6
MAR
VAN	85500	MACH REALISATION	171000
BAKEL	51300
COX	34200