Check my workCheck My Work button is now enabled

Item 11

Item 11 8.33 points

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 $20,000 to the partnership.

Cash	$	141,000
Liabilities		46,000
Monte, loan		42,000
Buarque, capital (50% of profits and losses)		28,000
Monte, capital (25%)		51,000
Vinicius, capital (25%)		(26,000	) (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 partnerships property. The partners have prepared the following balance sheet:

Cash	$	31,000		Liabilities	$	40,500
Drawdy, loan		16,000		Langston, loan		24,000
Noncash assets		172,000		Drawdy, capital (40%)		76,000
				Langston, capital (30%)		61,000
				Pearl, capital (30%)		17,500
Total assets	$	219,000		Total liabilities and capital	$	219,000

The firm sells the noncash assets for $131,000; it will use $26,000 of this amount to pay liquidation expenses. All three of these partners are personally insolvent.

Part C

Drawdy, Langston, and Pearl operate a local accounting firm as a partnership. After working together for several years, they have decided to liquidate the partnerships property. The partners have prepared the following balance sheet:

Cash	$	31,000		Liabilities	$	40,500
Drawdy, loan		16,000		Langston, loan		24,000
Noncash assets		172,000		Drawdy, capital		76,000
				Langston, capital		61,000
				Pearl, capital		17,500
Total assets	$	219,000		Total liabilities and capital	$	219,000

The firm sells the noncash assets for $131,000; it will use $17,000 of this amount to pay liquidation expenses. All three of these partners are personally insolvent. Assume that the profits and losses are split 2:4:4 to Drawdy, Langston, and Pearl, respectively.

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		17,000
Krups, capital (30% of profits and losses)		(42,000	) deficit
Lindau, capital (30%)		(41,000	) deficit
Riedel, capital (20%)		26,000
Schnee, capital (20%)		31,000