For the past several years, the Andrews, Caso, Quinn, and Sheridan partnership has operated a local department
Question:
For the past several years, the Andrews, Caso, Quinn, and Sheridan partnership has operated a local department store. Based on the provisions of the original articles of partnership, all profits and losses have been allocated on a 4:3:2:1 ratio, respectively. Recently, both Caso and Quinn have undergone personal financial problems and, as a result, are now insolvent. Caso’s creditors have filed a $20,000 claim against the partnership’s assets, and $22,000 is being sought to repay Quinn’s personal debts. To satisfy these legal obligations, the partnership property must liquidate. The partners estimate that they will incur $12,000 in expenses to dispose of all noncash assets. At the time that active operations cease and the liquidation begins, the following partnership balance sheet is produced. All measurement accounts have been closed out to arrive at the current capital balances.
Cash $20,000 Liabilities $140,000
Noncash assets 280,000 Caso, Loan 10,000
Total assets $300,000 Andrews, Capital 76,000
Caso, Capital 14,000
Quinn, capital 51,000
Sheridan, capital 9,000
Total liabilities and capital $ 300,000
Required:
Using the information available prior to the start of the liquidation process, prepare a pre-distribution plan for the partnership. You may use either the method developed in the book or the one I illustrated in class.
Expert Answer:
