Reference no: EM132754607
Farewell Partnership is undergoing liquidation. Information on Farewell follows:
Cash 40,000
Accounts receivable 180,000
Receivable from B 10,000
Inventory 160,000
Equipment 310,000 Total 700,000
Accrued liabilities 250,000
Payable to A 20,000
A, Capital (60%) 240,000
B, Capital (40%) 190,000
Total 700,000
Case #1: Lump-sum liquidation Information on the conversion of non-cash assets is as follows: a. Only 60% of the accounts receivable was collected; the balance is uncollectible. b. ?50,000 was received for the entire inventory. c. The equipment was sold at its carrying amount. d. ?10,000 Liquidation expenses were paid. Requirement: Determine the amounts of cash distributed to the partners in the final settlement of their capital accounts.
Case #2: Installment liquidation Information on the first conversion of non-cash assets is as follows:
a. Half of the accounts receivable was collected.
b. Inventory costing ?60,000 was sold for ?20,000.
c. Equipment with carrying amount of ?200,000 was sold for ?120,000.
d. ?10,000 liquidation expenses were paid.
e. The partners estimate additional liquidation costs of ?5,000.
f. Both partners are personally insolvent.
Requirement:
Problem 1: Determine the amounts of cash distributed to the partners from the partial realization of partnership assets.