Schedule of Safe Payments
After working for In the Kitchen remodeling business for several years, Terry and Phyllis decided
to go into business for themselves and formed the Kitchens Just for You Partnership. Three years
ago, they admitted Connie as a partner and recognized goodwill at that time because of her
good client list for planned kitchen makeovers. However, they were not able to gain a sufficient
market for new customers and on September 1, 20X9, they agreed to dissolve and liquidate
the business. They decided on an installment liquidation to complete the projects already initi-
ated. The balance sheet, with profit and loss–sharing percentages at the beginning of liquidation,
is as follows:
KITCHENS JUST FOR YOU Balance Sheet September 1, 20X9
| Assets | | Liabilities and Equities | |
| Cash | $ XXXXXXXXXX12,000 | Accounts XXXXXXXXXXPayable | $ XXXXXXXXXX43,000 |
| Receivables | 63,000 | Connie, XXXXXXXXXXLoan | 15,000 |
| Terry, XXXXXXXXXXLoan | 9,000 | Terry, XXXXXXXXXXCapital XXXXXXXXXX%) | 12,000 |
| Inventory | 48,000 | Phyllis, XXXXXXXXXXCapital XXXXXXXXXX%) | 36,000 |
| Goodwill | 28,000 | Connie, XXXXXXXXXXCapital XXXXXXXXXX%) | 54,000 |
| Total XXXXXXXXXXAssets | $160,000 | Total XXXXXXXXXXLiabilities & XXXXXXXXXXEquities | $160,000 |
Connie’s loan was for working capital; the loan to Terry was for his unexpected personal medical bills.
| Cash | $ XXXXXXXXXX,000 | Accounts Payable | $15,000 |
| Inventory | XXXXXXXXXX,000 | Maness, Capital | 65,000 |
| | | Joiner, Capital | 65,000 |
| Cash | $ XXXXXXXXXX,000 | Accounts Payable | $ XXXXXXXXXX,000 |
| Noncash Assets | 190,000 | Nelson, Capital | 15,000 |
| | | Osman, Capital | 75,000 |
| | | Peters, Capital | 75,000 |
| | | Quincy, Capital | 30,000 |
| Total Assets | $207,000 | Total Liabilities & Equities | $207,000 |
During September 20X9, the f irst month of liquidation, the partnership collected $41,000 in | | receivables and decided to write off $12,000 of the remaining receivables. Sales of one-half of the book value of the inventory realized a loss of $4, XXXXXXXXXXThe partners estimate that the costs of liquidating the business (newspaper ads, signs, etc.), are expected to be $6,000 for the remainder of the liquidation process. |
| Required Prepare a schedule of safe payments to partners as of September 30, 20X9, to show how the avail- |
| able cash should be distributed to the partners. |
| |