Partners Dennis and Lilly have decided to liquidate their business.The following information is available:
Dennis and Lilly share profits and losses in a 3:2 ratio.During the first month of liquidation,half the inventory is sold for $60,000,and $60,000 of the accounts payable is paid.During the second month,the rest of the inventory is sold for $45,000,and the remaining accounts payable are paid.Cash is distributed at the end of each month,and the liquidation is completed at the end of the second month.
-Refer to the information provided above.Using a safe payments schedule,how much cash will be distributed to Lilly at the end of the second month?

Question

Partners Dennis and Lilly have decided to liquidate their business.The following information is available:
  Dennis and Lilly share profits and losses in a 3:2 ratio.During the first month of liquidation,half the inventory is sold for $60,000,and $60,000 of the accounts payable is paid.During the second month,the rest of the inventory is sold for $45,000,and the remaining accounts payable are paid.Cash is distributed at the end of each month,and the liquidation is completed at the end of the second month.
-Refer to the information provided above.Using a safe payments schedule,how much cash will be distributed to Lilly at the end of the second month?

Quizplus · Accepted Answer

To determine the safe payments schedule, we need to calculate the amount of cash available each month for distribution. Here are the calculations:

Month 1:
- Received $60,000 from inventory sold
- Paid $60,000 of accounts payable
- Total cash available: $0

Month 2:
- Received $45,000 from remaining inventory sold
- Paid remaining accounts payable
- Total cash available: $0

Since there is no cash remaining at the end of the liquidation, no cash can be distributed to either partner. Therefore, the answer is (D) $0.

Note: It's important to calculate the safe payments schedule because it ensures that partners are paid in a fair and equitable manner as the liquidation proceeds. In this case, there was not enough cash available to distribute to either partner.

Partners Dennis and Lilly Have Decided to Liquidate Their Business