Question

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Partnerships: Termination & Liquidation 20 points On January 1, 2018, the partners of Won, Cadel, and Dax (who shared profits and losses in the ratio of 5:3:2, respectively) decided to liquidate their partnership. The trial balance at this date was as follows: Debit Credit Cash Accounts Receivable Inventory Machinery and equipment, net Accounts payable S 30,000 70,000 50,000 250,000 60, 000 120,000 130,000 90,000 S 400,000 400,000 Cadel, capital Dax, capital Totals The partners planned an installment program to dispose of the business assets and to mi liquidation losses. All available cash, less an amount retained to provide for future expenses was to be distributed to the partners at the end of each month. A summary of liquidation transactions in January follows anuary $60,000 was collected on the accounts receivable; the balance was deemed to uncollectible. $40,000 was received for the entire inventory. $60,000 was paid to outside creditors. Cash of $10,000 was retained at the end of the month to cover unrecorded liabilities and anticipated expenses. The balance of cash was distributed to the partners. . Required: Calculate the safe payments to be made to Won, Cadel, and Dax at the end of January.

Answer 1

Here profit and loss sharing ratio is 5:3:2 between Won, Cadel,Dax .

Hence, we can won will get 5/10 of profit and loss.

Similarly Cadel 3/10 and Dax 2/10.

Statement of partnership liquidation

Descriptions	Cash	Machinery and equipment	Won’s Capital	Cadel’s Capital	Dax’s Capital
Opening balance	$30000	$250000	$120000	$130000	$90000
Collection from Accounts receivable	$60000		($5000)	($3000)	($2000)
Received from inventory	$40000		($5000)	($3000)	($2000)
Paid to outside creditors	($60000)
Cash retain for unrecorded liabilities and anticipated expenses	($10000)		($5000)	($3000)	($2000)
Received from Disposal of Assets	$250000	($250000)
Final Cash Distribution	$310000	-	$105000	$121000	$84000

So ,

Working Note:-

Loss distribute to partner’s capital account

1.

Loss from accounts receivable = (Opening balance – collection of accounts receivable)

=$70000-$60000=$10000

Own’s share of losses = $10000X5/10=$5000

Cadel’s share of losses =$10000X3/10=$3000

Dax’s share of losses =$10000X2/10=$2000

2.

Loss from inventory = $50000-$40000=$10000

Own’s share of losses = $10000X5/10=$5000

Cadel’s share of losses =$10000X3/10=$3000

Dax’s share of losses =$10000X2/10=$2000

3.

Distribution of unrecorded liabilities and anticipated expenses

Own’s share of losses = $10000X5/10=$5000

Cadel’s share of losses =$10000X3/10=$3000

Dax’s share of losses =$10000X2/10=$2000