Problem: The partnership of Rachel, Adams and Nixon has the following trial balance on September 30,2012:
Debits Credits
Cash 20,000
Acc Receivable 30,000
Inventory 35,000
Plant and Equip.(net) 215,000
Acc Payable 40,000
Rachel, Capital 120,000
Adams, Captial 90,000
Nixon, Capital 50,000
total 300,000 300,000
The partners share the profits and losses as follow; Rachel 50%, Adams 30%, and NIxon 20%.
The partners are considering an offer of 180,000 for the accounts receivable, inventory and Plant/equipment as September 30. The 180,000 will be paid to the creditors and the partners in installments, the number and amounts of which are to be negotiated. The partners have decided to liquidate their partnership by installments instead of accepting the offer of 180,000. Cash is distributed to the partners at the end of the month. A summary of the liquidation transaction follows:
October
1. 25,000 is collected on Acc Rec : balance is uncollectible
2. 20,000 received for the entire inventory
3. 1,500 liquidation expense paid
4. 40,000 cash paid to creditors
5. 10,000 cash retained in the business at the end of the month
November
6. 2,000 in liquidation expenses paid.
7. As part payment of his capital, Nixon accpted an item of special equipment that he developed, which had a book value of 8,000. The partners agreed that a value of 12,000 should be placed on this item for liquidation purposes.
8. 4,000 cash retained in the business at the end of the month
December
9. 150,000 received on sale of the remeining plant and equipment
10. 1,000 liquidation expenses paid. No cash retained in the business.
Prepare a statement of partnership realization and liquidation with supporting schedules of safe ayments to partners.