Reference no: EM131806586
Question - The partnership of Rachel, Adams, and Nixon has the following trial balance on September 30, 2009:
Cash $20,000(dr)
Accounts Receivable (net) 30,000(dr)
Inventory (35,000)(dr)
Plant and Equipment (net) 215,000(dr)
Total $300,000
Accounts payable $40,000(cr)
Rachel, capital 120,000(cr)
Adams Capital 90,000(cr)
Nixon Capital 50,000(cr)
Total $300,000
The partners share profits and losses as follows: Rachel, 50 percent; Adams, 30 percent; and Nixon, 20 percent. The partners are considering an offer of $180,000 for the accounts receivable, inventory, and plant and equipment as of September 30. The $180,000 will be paid to 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 end of each month.A summary of the liquadation transactions follows:
October:
1. $25,000is collected on accounts receivable; balance is uncollectible.
2. $20,000 received for the entire inventoru.
3. $1,500 liquidation expense paid.
4. $40,000 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 accepted an item of special equipment that the developed,which had a book value of $8,000.The partners agreed that a value of $12,000 should be plased 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 remaining plant equipment.
10. $1,000 liquidation expenses paid.No cash retained in the business.
Required: Prepare a statement of partnership realization and liquidation with supporting schedule of safe payments to partners.