Exam 15: A: Partnerships: Termination and Liquidation

Harding, Jones, and Sandy, a partnership, is in the process of liquidating.The partners have the following capital account balances; $24,000, $24,000, and ($9,000) respectively.The partners share all profits and losses 16%, 48%, and 36%, respectively.Sandy has indicated that the ($9,000) deficit will be covered with a forthcoming contribution.The remaining partners have requested an immediate distribution of $20,000 in cash that is available.How should this cash be distributed?

What amount of cash was available for safe payments, based on the above information?

Jones, Marge, and Tate LLP decided to dissolve and liquidate the partnership on September 30, 2018.After realization of a portion of the noncash assets, the capital account balances were Jones $50,000; Marge $40,000; and Tate $15,000.Cash of $35,000 and other assets with a carrying amount of $100,000 were on hand.Creditors' claims totaled $30,000.Jones, Marge, and Tate shared net income and losses in a 2:1:1 ratio, respectively. Prepare a working paper to compute the amount of cash that may be paid to creditors and to partners at this time, assuming that no partner is solvent.

What is the purpose of a predistribution plan?

What events or circumstances might force the termination of a partnership and liquidation of its assets?

How much cash should each partner receive at this time, pursuant to a proposed schedule of liquidation?

What should occur when a solvent partner has a deficit balance?

Prepare the journal entry for Donald, Chief & Berry LLP on August 1, 2018, to record the offset of the loan receivable from Donald.

If the building is sold for $50,000 and there are no liquidation expenses what amount should Harry receive in the final settlement?

Prepare a schedule to calculate the safe payments to be made to the partners at the end of January.

Gonda, Herron, and Morse is considering possible liquidation because partner Morse is personally insolvent.The partners have the following capital account balances: $60,000, $70,000, and $40,000, respectively, and share profits and losses 30%, 45%, and 25%, respectively.The partnership has $200,000 in noncash assets that can be sold for $150,000.The partnership has $10,000 cash on hand, and $40,000 in liabilities.What is the minimum that partner Morse's creditors would receive if they have filed a claim for $50,000?

If the noncash assets are sold for $105,000, what would be the maximum amount of cash that Canton could expect to receive?

If the assets could be sold for $228,000 and there are no liquidation expenses, what is the minimum amount that Ezzard would receive from the liquidation?

How would $200,000 be distributed?

If the assets could be sold, for $228,000 and there are no liquidation expenses what is the amount that Tillman would receive from the liquidation?

Which one of the following statements is true for a predistribution plan?

Before liquidating any assets, the partners determined the amount of cash for safe payments and distributed it.The noncash assets were then sold for $120,000.The liquidation expenses of $5,000 were paid prior to the sale of noncashassets.How would the $120,000 be distributed to the partners? (Hint: Either a predistribution plan or a schedule of safe capital balances would be appropriate for solving this item.)

The Arnold, Bates, Carlton, and Delbert partnership was liquidating.It had paid all its liabilities and had some assets yet to be sold.The partners had capital account balances of ($50,000), $90,000, $110,000, and $130,000.There was $40,000 cash available for distribution to the partners.What procedures would be followed to determine the amount of cash that could safely be distributed to each partner?

Which of the following statements is true concerning the distribution of safe payments?

Prepare the journal entry for Donald, Chief & Berry LLP on August 1, 2018, to record payment of liabilities.