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ACC - Partners Petre, Reeves, Virgo and Kinsey share

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Question;Partners Petre, Reeves, Virgo and Kinsey share income in a ratio of 4:2:2:2, respectively. On April 1, 2015, they decided to terminate operations and begin a process of liquidation. The partnership?s trial balance on that date shows the following:Debit CreditCash $ 32,000 Accounts receivable 87,000 Loan Receivable from Reeves 25,000 Inventory 55,000 Land 30,000 Equipment 112,000 Truck 37,000 Accounts Payable $ 48,000Loan Payable 75,000Loan Payable to Petre 80,000Petre, Capital 71,000Reeves, Capital 42,000Virgo, Capital 53,000Kinsey, Capital 9,000Total $378,000 $378,000Assets were sold over a three-month period. At the end of each month, available cash was distributed to the partners. The liquidation proceeds as follows:April 2015:1. Returned inventory costing $10,000 to the supplier, who granted a credit of $8,500 against the open accounts payable.2. Collected $45,000 of the accounts receivable, collection of the remainder is uncertain.3. Sold the remaining inventory to a competitor for $30,000.4. Sold the equipment for $80,000.5. Paid liquidation expenses of $5,500.6. Paid the general loan and the remaining accounts payable in full.7. Retained $20,000 of cash for potential future obligations and liquidation expenses.May 2015:1. Collected $15,000 of the accounts receivable, and the remainder is determined to be uncollectible.2. Transferred the truck to Petre in exchange for a $30,000 reduction in partnership?s loan payable to Petre.3. Paid liquidation expenses of 3,000.4. Retained $10,000 of cash for potential future obligations and liquidation expenses.June 2015:1. Sold the land for $125,000.2. Paid liquidation expenses of $8,000.3. Distributed all remaining cash.REQUIRED:1. Develop a pre-distribution plan for this partnership as of April 1, 2015. Assume estimated liquidation expenses of $20,0002. Determine how the available cash to be distributed at the end of April, May, and June according to the plan developed in Part 1.

 

Paper#42415 | Written in 18-Jul-2015

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