‫)‪Sheet (6‬‬

‫‪Second : installment liquidation‬‬

‫‪Steps of installment liquidation‬‬

‫‪1. collection of A/R & sales of noncash assets‬‬
‫‪and distribution of any gain or loss‬‬
‫بيع جزء من االصول وتوزيع اى مكسب او خساره على الشركاء‬
‫‪2. payment of actual liquidation expense‬‬
‫دفع اى مصاريف فعلية متعلقة بعملية التصفية مثل مصاريف المحاسب والمحامى‬

‫)‪3. payment to outside creditors (liabilities‬‬

‫لو الشركة عليها ديون بسددها " كلها او جزء منها " حسب معطيات المسالة‬
‫‪4. safe payment to partners‬‬
‫" توزيع‪ Q‬جزء من الفلوس على الشركاء بحيث تكون الشركة فى وضع امن‬
‫ويتم تحديدها من جدول ال ‪Safe payment‬‬
‫ملحوظه هامه كل شهر له ‪ Safe payment‬ماعدا اخر شهر بتكون تصفية فعلية‬

‫جدول الدفع االمن ‪Schedule of safe payment‬‬

‫الهدف منه‬
‫توزيع جزء من الفلوس على الشركاء بحيث تكون الشركة فى وضع امن عند اجراء عملية التصفية‪Q‬‬
‫ويقصد بكلمة وضع امن ‪Safe payment‬‬
‫انه ال يتم توزيع فلوس على الشركاء حتى يتم تسديد كل االلتزامات "الديون" ودفع المصاريف عملية‬
‫التصفية‪ Q‬لذلك بتوقع االسواء وهو التالى‬
‫‪2. capital &loan balances‬‬ ‫‪Capital + loan payable‬‬
‫‪Captal – loan receivable‬‬
‫‪2. assume that full loss of any remaining‬‬
‫بتفترض‪ Q‬انك خسرت الباقى من االصول ‪+‬‬
‫‪noncash assets and any anticipated‬‬
‫اى مصاريف متوقعة ويتم توزيعها على‬
‫‪liquidation expense and allocated using‬‬ ‫الشركاء على النسب‬
‫‪profit & loss ratio‬‬

‫‪3. assume that potential deficit must be‬‬ ‫اى عجز فى راس مال الشركاء يتحمله‬
‫‪absorbed by other partner‬‬ ‫الشركاء االخرين "بتوقع االسواء دائما‬
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Problem (2- 15)
The trial balance of the NOT Partnership on April 30, 20X1, is presented below. The
profit and loss percentages are shown in the trial balance:
CDG Partnership
Balance Sheet
AT December 1, 20X6
Debit Credit
 Cash $15,000
 Accounts Receivable (net) 85,000
 Inventories 82,000
 Plant Assets (net) 120,000
 Accounts Payable $90,000
 Otter, Loan 15,000
 Nate, Capital (60%) 80,000
 Otter, Capital (20%) 57,000
 Trin, Capital (20%) 60,000
 Total $302,000 $302,000

The partnership is being liquidated. Liquidation activities are as follows:

May June July
Accounts receivable collected $40,000 $28,000 $13,000
Noncash assets sold:
 Book value 44,000 35,000 123,000
 Selling price 50,000 30,000 80,000
Accounts Payable paid 65,000 25,000
Liquidation expenses:
Paid during month 3,500 3,000 2,500
Anticipated for remainder of liquidation process 6,000 4,000

Cash is distributed at the end of each month, and the liquidation is completed by
July 31, 20X1. No interest accrues on Otter's loan during the liquidation.

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Solution

NOT Partnership
Statement of partnership realization and liquidation
Non Otter Capital balances
Cash Cash liabilites Loan Nate Otter Trin
assets payable 60% 20% 20%
Preliquidation balances 15,000 287,000 (90,000) (15,000) (80,000) (57,000) (60,000)
May :
1) collection of A/R & sale of assets & 90,000 (84,000) ______ ______ (3,600) (1,200) (1,200)
allocation of 6,000 gain 105,000 203,000 (90,000) (15,000) (83,600) (58,200) (61,200)
2) payment of actual liquidation expense (3,500) _______ ______ _______ 2,100 700 700
During month 101,500 203,000 (90,000) (15,000) (81,500) (57,500) (60,500)
3) payment to outside liquidation (65,000) ______ 65,000 _______ ______ ______ ______
during month 36,500 203,000 (25,000) (15,000) (81,500) (57,500) (60,500)
4) payment to partners (schedule 1) (5,500) ______ ______ 5,500 ______ ______ ______
31,000 203,000 (25,000) (9,500) (81,500) (57,500) (60,500)
June :
1) collection of A/R & sale of assets & 58,000 (63,000) ______ ______ 3,000 1,000 1,000
allocation of 5,000 loss 89,000 140,000 (25,000) (9,500) (78,500) (56,500) (59,500)
2) payment of actual liquidation expense (3,000) _______ ______ ______ 1,800 600 600
During month 86,000 140,000 (25,000) (9,500) (76,700) (55,900) (58,900)
3) payment to outside creditors (25,000) ______ 25,000 _______ ______ ______ ______
61,000 140,000 -0- (9,500) (76,700) (55,900) (58,900)
4) payment to partners (schedule 2) (57,000) ______ ______ 9,500 _______ 22,250 25,250
4,000 140,000 -0- -0- (76,700) (33,650) (33,650)
July :
1) collection of A/R & sale of assets & 93,000 (140,000) ______ ______ 28,200 9,400 9,400
allocation of 47,000 loss 97,000 -0- -0- -0- (48,500) (24,250) (24,250)
2) payment of actual liquidation expenses (2,500) _______ ______ ______ 1,500 500 500
during month 94,500 -0 - -0- -0- (47,000) (23,750) (23,750)
3) payment to partners (94,500) 47,000 23,750 23,750
Post liquidation balances -0- -0- -0- -0- -0- -0- -0-
Installment liquidation

NOT Partnership
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 Schedule of safe payment to partners

Nate Otter Trin

60% 20% 20%
Schedule (1) : may 2001
Computation of distribution of cash available on may :
1) Capital & loan balances, may 31 before cash distribution (81,500) (72,500) (60,500)
2) Assume full loss of 203,000 on remaining noncash assets &
6,000 in possible future liquidation expenses, allocated
using profit & loss ratio. (203,000 +6,000) = 209,000 125,400 41,800 41,800
43,900 (30,700) (18,700)
3) Assume nate potential deficit must be absorbed by otter
( 43,900 × 20/40) & trin ( 43,900 × 20/40) (43,900) 21,950 21,950
-0- (8,750) 3,250
4) Assume that trin potential deficit must be absorbed by otter _______ 3,250 (3,250)
5) Safe payment to partners, may -0- (5,500) -0-

Schedule (2) : june 2001

1) Capital & loan balances, before cash distribution (76,700) (65,400) (58,900)
2) Assume full loss of 140,000 on remaining noncash assets &
4,000 in possible future liquidation expenses, allocated using 86,400 28,800 28,800
profit & loss ratio. Notes  (140,000 + 4,000 = 144,000 ) 9,700 (36,600) (30,100)

3) Assume nate potential deficit must be absorbed by

Otter ( 9,700 × 20/40) & trin ( 9,700 × 20/40) (9,700) 4,850 4,850
4) Safe payment to partners, june -0- (31,750) (25,250)

P2-16: Installment Liquidation

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On January 1, 20X1, the partners of Able, Black, and Ciou, who share profits and
losses in the ratio of 5:3:2, respectively, decide to liquidate their partnership.
The partnership trial balance at this date is as follows:
Debit Credit
 Cash $18,000
 Accounts Receivable (net) 66,000
 Inventories 52,000
 Machinery and Equipment (net) 189,000
 Able, Loan 30,000
 Accounts Payable $53,000
 Black, Loan 20,000
 Able, Capital 118,000
 Black, Capital 90,000
 Ciou, Capital 74,000
Total $355,000 $355,000

The partners plan a program of piecemeal conversion of assets in order to minimize

liquidation losses. All available cash, less an amount retained to provide for future
expenses, is to be distributed to the partners at the end of each month. No interest
accrues on partners' loans during liquidation. A summary of the liquidation
transactions is as follows:

January 20X1:
1. $51,000 was collected on accounts receivable; the balance is uncollectible.
2. $38,000 was received for the entire inventory.
3. $2,000 liquidation expenses were paid.
4. $50,000 was paid to outside creditors, after offset of a $3,000 credit memorandum
received on January 11, 20X1.

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5. $10,000 cash was retained in the business at the end of the month for potential
unrecorded liabilities and anticipated expenses.

February 20X1:
6. $4,000 liquidation expenses were paid.
7. $6,000 cash was retained in the business at the end of the month for potential
unrecorded liabilities and anticipated expenses.

March 20X1:
8. $146,000 was received on sale of all items of machinery and equipment.
9. $5,000 liquidation expenses were paid.
10. The $30,000 loan from Able is approved by the partners for offset against his
capital account.
11. No cash was retained in the business.

Required:
Prepare a statement of partnership liquidation for the partnership with schedules of
safe payments to partners.

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 ABC Partnership
Statement of partnership realization & liquidation
Non A Loan Black Capital balances
Cash Cash receiva liabilites Loan A B C
assets ble Payable 5 3 2
Preliquidation balances 18,000 307,000 30,000 (53,000) (20,000) (118,000) (90,000) (74,000)
January :
1) collection of A/R & sale of 51,000 (66,000) 7,500 4,500 3,000
assets & allocation of 15,000 loss
2) sales of inventory & allocation 38,000 (52,000) ______ ______ ______ 7,000 4,200 2,800
14,000 loss. 107,000 189,000 30,000 (53,000) (20,000) (103,500) (81,300) (68,200)
3) payment of liquidation expense (2,000) 1,000 600 400
4) paid liabilities & gain 3,000 (50,000) _______ ______ 53,000 ______ (1,500) (900) (600)
discount. 55,000 189,000 30,000 -0- (20,000) (104,000) (81,600) (68,400)
5) safe payment to partners (45,000) _______ ______ ______ 20,000 _______ 6,600 18,400
10,000 189,000 30,000 -0- -0- (104,000) (75,000) (50,000)
February:
1) payment of liquidation expense (4,000) ______ ______ ______ ______ 2,000 1,200 800
2) no payment to partners 6,000 189,000 30,000 -0- -0- (102,000) (73,800) (49,200)

march:
1) sale of equipment & allocate 146,000 189,000 _____ ______ ______ 21,500 12,900 8,600
43,000 loss. 152,000 -0- 30,000 -0- -0- (80,500) (60,900) (40,600)
2) Payment of liquidation expense (5,000) _____ _____ ______ 2,500 1,500 1,000
147,000 -0- 30,000 -0- -0- (78,000) (59,400) (39,600)
3) Offset of A’s loan receivable
against his capital (30,000) 30,000
4) Payment to partners (147,000) 48,000 59,400 39,600
-0- -0- -0- -0- -0- -0- -0- -0-
Installment liquidation

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 ABC Partnership
Schedule of safe payment to partners
A B C
5 3 2
Schedule (1) : January 1
Computation of distribution of cash available
1) Capital & loan balances, Jan 31 before cash distribution (74,000) (101,600) (86,400)
2) Assume full loss of 189,000 on remaining noncash assets
& 10,000 retained in business 99,500 59,700 39,800
25,500 (41,900) (28,600)
3) Assume A potential deficit must be absorbed by B
= ( 25,500 × 3/5) & C = ( 25,500 × 2/5) (25,500) 15,300 10,200
4) Safe payment to partners -0- (26,600) (18,400)

Schedule (2) : February

1) Capital & loan balances, February 29 (72,000) (73,800) (49,200)

2) Assume full loss of 189,000 on remaining noncash assets 97,500 58,500 39,000
& 6,000 retained in business . 25,500 (15,300) (10,200)

3) Assume “A” potential deficit must be absorbed by B & C (25,500) 15,300 10,200
4) Safe payment to partners -0- -0- -0-

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