Partners Alice and Betty have decided to liquidate their business. The ledger shows the following account...

Partners Alice and Betty have decided to liquidate their business. The ledger shows the following account balances:

Cash	$ 20,000	Accounts Payable	$70,000
Inventory	380,000	A, Capital	190,000
		B, Capital	140,000
Total Assets	$400,000	Total Liability and Capital	$400,000

Alice and Betty share profits and losses in a 6:4 ratio. During the first month of liquidation, $180,000 is paid for 3/4 of inventory. $40,000 is paid to creditors. During the second month, the rest of the inventory was sold for $50,000, and the remaining accounts payable were paid. Cash was distributed at the end of each month, and the liquidation was completed at the end of the second month.

Required:

Prepare a statement of partnership realization and liquidation with a schedule of safe payments for the two-month liquidation period.

Expert Solution

In this problem, partners are to be paid after realization of all the assets i.e. inventory here and payment of all the liabilities i.e. accounts payable here. Safe payment means that in 1st month itself, the potential loss on unsold inventory has to be accounted for

				Alice Capital	Betty capital
	Cash	Inventory	Accounts Payable	60%	40%
Balances	20000	380000	-70000	-190000	-140000
Sale of inventory	180000	-285000		63000	42000
Payment to creditors	-40000		40000
Balances	160000	95000	-30000	-127000	-98000

Payment to partners (working note)	-130000			70000	60000
Balance	30000	95000	-30000	-57000	-38000
Sale of inventory in 2nd month	50000	-95000		27000	18000
Payment to creditors	-30000		30000
Balance	50000	0	0	-30000	-20000
Payment to partners	-50000			30000	20000
Balance	0			0	0

Working notes

	Alice	Betty
Capital Balances	-127000	-98000
Potential loss on remaining inventory 95,000 in 6:4	57000	38000
Safe payment to partners	-70000	-60000

ekkarill92 answered 2 years ago

The partners in Crane Company decide to liquidate the firm when the balance sheet shows the...

The partners in Crane Company decide to liquidate the firm when the balance sheet shows the following. Crane Company Balance Sheet May 31, 2020 Assets Liabilities and Owners’ Equity Cash $29,900 Notes payable $13,000 Accounts receivable 24,500 Accounts payable 26,800 Allowance for doubtful accounts (1,400 ) Salaries and wages payable 4,300 Inventory 34,800 A. Jamison, capital 33,800 Equipment 21,600 S. Moyer, capital 23,100 Accumulated depreciation—equipment (5,700 ) P. Roper, capital 2,700 $103,700 $103,700 The partners share income and loss 5:3:2....

The partners in Sandhill Company decide to liquidate the firm when the balance sheet shows the...

The partners in Sandhill Company decide to liquidate the firm when the balance sheet shows the following. Sandhill Company Balance Sheet May 31, 2020 Assets Liabilities and Owners’ Equity Cash $29,100 Notes payable $13,300 Accounts receivable 25,500 Accounts payable 26,700 Allowance for doubtful accounts (1,500 ) Salaries and wages payable 4,000 Inventory 35,000 A. Jamison, capital 33,500 Equipment 21,400 S. Moyer, capital 24,000 Accumulated depreciation—equipment (5,300 ) P. Roper, capital 2,700 $104,200 $104,200 The partners share income and loss 5:3:2....

You and your partners have decided to open a small printing and copying business in a...

You and your partners have decided to open a small printing and copying business in a college town of 100,000 people in Canada. Your business will compete with companies like FedEx Office. You know that over 50% of small businesses fail in their first year, so to increase your chances of success, you have decided to perform a detailed analysis of the task environment of the copying business to discover what opportunities and threats you will encounter. 1. Decide what...

Angela and Betty each own 50% of Hair Sensations, an incorporated salon business. They have decided...

Angela and Betty each own 50% of Hair Sensations, an incorporated salon business. They have decided to split the corporation into two. Angela will keep Hair Sensations, and Betty will start a new company, Hair and Nails by Betty. $50,000 in equipment, $5,000 in cash, and $14,000 in loans will be split equally between the two corporations. The split of assets and liabilities between the two corporations will close on December 31, 20X8. Document this transaction using the split-off type...

When partners agreed to liquidate the business, the assets were sold for P900,000 and the liabilities were paid.

Villanueva and Santos are about to liquidate their partnership. They each have P200.000 capital balances and they share profit and losses in a 3:1 ratio, respectively. In addition, the partnership has P250,000 in cash, P450,000 non-cash assets, and P300,000 in accounts payable. Assuming that non-cash assets are sold for P170,000 and that both partners are personally solvent, prepare a statement of liquidation. VS Partnership Statement of Liquidation.A. On December 31, 2019, the Modesto and Corpuz Partnership had the following assets,...

Nada, Aisha, Sarah and Khadija have decided to liquidate their partnership. At the time of liquidation...

Nada, Aisha, Sarah and Khadija have decided to liquidate their partnership. At the time of liquidation the balance sheet was as follows: Cash 12,000 Accounts payable 12,000 Noncash assets 190,000 Nada Capital 15,000 Total assets 202,000 Aisha Capital 75,000 Sarah Capital 75,000 Khadija Capital 25,000 Total liabilities and capital 202,000 Partners Nada, Aisha, Sarah and Khadija share profits/losses according to the ratios 3:3:2:2. During liquidation, the partners sold the noncash assets for...

March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 4:2:2 basis, respectively. Recently, each partner has become personally insolvent and, thus, the partners have decided to liquidate the

March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 4:2:2 basis, respectively. Recently, each partner has become personally insolvent and, thus, the partners have decided to liquidate the business in hopes of remedying their personal financial problems. As of September 1, the partnership’s balance sheet is as follows: Cash$26,000Liabilities$95,000Accounts receivable114,000March, capital57,000Inventory104,000April, capital90,000Land, building, and equipment (net)59,000May, capital61,000Total assets$303,000Total liabilities and capital$303,000 Prepare journal entries for the following transactions: (Do not...

The cash account of Concord Corporation shows a ledger balance of $3,968.70 on June 30, 2020....

The cash account of Concord Corporation shows a ledger balance of $3,968.70 on June 30, 2020. The bank statement as at that date shows a balance of $4,128. When the statement was compared with the cash records, the following facts were determined: 1. There were bank service charges for June of $30. 2. A bank memo stated that a note from Bao Dai for $880 and interest of $34 had been collected on June 29, and the bank had made...

Riverbed Spa shows a general ledger balance for the Cash account of $5,227.95 on June 30...

Riverbed Spa shows a general ledger balance for the Cash account of $5,227.95 on June 30 and the bank statement as of that date indicates a balance of $4,450.00. When the statement was compared with the cash records, the following facts were determined: 1. There were bank service charges for June of $34.00. 2. A bank memo stated that Bao Dai’s note for $900 and interest of $46.00 had been collected on June 29, and the bank had charged $6.30...

Novak Spa shows a general ledger balance for the Cash account of $3,974.35 on June 30...

Novak Spa shows a general ledger balance for the Cash account of $3,974.35 on June 30 and the bank statement as of that date indicates a balance of $4,145.00. When the statement was compared with the cash records, the following facts were determined: 1. There were bank service charges for June of $33.00. 2. A bank memo stated that Bao Dai’s note for $897.00 and interest of $42.00 had been collected on June 29, and the bank had charged $7.50...

Question