Following is a series of independent cases. In each situation, indicate the cash distribution to be made
Question:
Following is a series of independent cases. In each situation, indicate the cash distribution to be made to partners at the end of the liquidation process. Unless otherwise stated, assume that all solvent partners will reimburse the partnership for their deficit capital balances.
Part A
The Buarque, Monte, and Vinicius partnership reports the following accounts. Vinicius is personally insolvent and can contribute only an additional $9,000 to the partnership.
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $130,000
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000
Monte, loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Buarque, capital (50% of profits and losses) . . . . . . . . 50,000
Monte, capital (25%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Vinicius, capital (25%) . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,000) (deficit)
Part B
Drawdy, Langston, and Pearl operate a local accounting firm as a partnership. After working together for several years, they have decided to liquidate the partnership’s property. The partners have prepared the following balance sheet:
The firm sells the noncash assets for $120,000; it will use $15,000 of this amount to pay liquidation expenses. All three of these partners are personally insolvent.
Part C
Use the same information as in Part B, but assume that the profits and losses are split 2:4:4 to Drawdy, Langston, and Pearl, respectively, and that liquidation expenses are only $6,000.
Part D
Following the liquidation of all noncash assets, the partnership of Krups, Lindau, Riedel, and Schnee has the following account balances. Krups is personally insolvent.
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,000
Krups, loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Krups, capital (30% of profits and losses) . . . . . . . . . . . . . . . . (20,000) deficit
Lindau, capital (30%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,000) deficit
Riedel, capital (20%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Schnee, capital (20%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Step by Step Answer:
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik