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    Partnership Liquidation Problem For Discussion

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    Kristel Sumabat
    The partnership is being liquidated either through a lump-sum method or installment method. For the lump-sum method, non-cash assets were sold for less than book value, resulting in cash distributions to partners. For the installment method, assets were sold over two months with cash distributed monthly according to two different payment schedules.

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    Partnership Liquidation Problem For Discussion

    Uploaded by

    Kristel Sumabat
    129 views1 page
    The partnership is being liquidated either through a lump-sum method or installment method. For the lump-sum method, non-cash assets were sold for less than book value, resulting in cash distributions to partners. For the installment method, assets were sold over two months with cash distributed monthly according to two different payment schedules.

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    The partnership is being liquidated either through a lump-sum method or installment method. For the lump-sum method, non-cash assets were sold for less than book value, resulting in cash distributions to partners. For the installment method, assets were sold over two months with cash distributed monthly according to two different payment schedules.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    129 views1 page

    Partnership Liquidation Problem For Discussion

    Uploaded by

    Kristel Sumabat
    The partnership is being liquidated either through a lump-sum method or installment method. For the lump-sum method, non-cash assets were sold for less than book value, resulting in cash distributions to partners. For the installment method, assets were sold over two months with cash distributed monthly according to two different payment schedules.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Partnership Liquidation

    The statement of financial position of ABC Co. before the liquidation is as follows:

    Cash 40,000 Accounts Payable 60,000


    Account Receivable 120,000 Payable B 40,000
    Inventory 240,000 A, Capital (20%) 200,000
    Equipment 800,000 B, Capital (30%) 300,000
    Acc. Depreciation (200,000) C, Capital (50%) 400,000
    Total Assets 1,000,000 Total Liabilities & Equity 1,000,000

    Case 1: Lump-sum liquidation


    Assuming the non-cash assets were realized as follows:
    a. Of the total accounts receivable, only 100,000 were collected.
    b. The entire inventory was sold for 140,000.
    c. The equipment was sold for 500,000.
    d. 4,000 liquidation expenses were paid.

    Compute for the cash distributions to the partners.

    Case 2: Installment Method


    The partnership will be liquidated on an installment basis. Distributions to the partners will be made as
    cash becomes available.

    The following transactions occurred in the first month:


    a. 75% of the total accounts receivable was collected for only 60,000.
    b. Half of the inventory was sold for 80,000.
    c. The equipment with carrying amount of 400,000 was sold for 240,000.
    d. 4,000 liquidation expenses were paid. Estimated future liquidation expenses totaled 2,000.
    e. 18,000 cash was retained in the business for potential unrecorded liabilities and
    anticipated expenses.

    The following transactions occurred in the second month:


    a. 20,000 was collected on the remaining accounts receivable; the balance was
    deemed uncollectible.
    b. The other half of the inventory was sold for 40,000.
    c. The remaining items included in the equipment account were sold for 60,000.
    d. 20,000 liquidation expenses and previously unrecorded liabilities were paid.
    e. The liquidation process ended at the end of the month.

    Compute for the cash distributions to the partners for the first and second month using SAFE PAYMENT SCHEDULE.
    Compute for the cash distributions to the partners for the first and second month using CASH PRIORITY PROGRAM.

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