Exam 15: Partnerships: Termination and Liquidation

REFERENCE: Ref.15_02 On January 1,2009,the partners of Won,Cadel,and Dax (who shared profits and losses in the ratio of 5:3:2,respectively)decided to liquidate their partnership.The trial balance at this date was as follows: The partners planned a program of piecemeal conversion of the business assets to minimize liquidation losses.All available cash,less an amount retained to provide for future expenses,was to be distributed to the partners at the end of each month.A summary of liquidation transactions follows: -Prepare a schedule to calculate the safe installment payments to be made to the partners at the end of January.

What are the provisions of the marshaling of assets doctrine?

Dancey,Reese,Newman,and Jahn were partners who shared profits and losses on a 4:2:2:2 basis,respectively.They were beginning to liquidate their business.At the start of the process,capital balances were as follows: Which one of the following statements is true?

Why is a Schedule of Liquidation prepared?

REFERENCE: Ref.15_02 On January 1,2009,the partners of Won,Cadel,and Dax (who shared profits and losses in the ratio of 5:3:2,respectively)decided to liquidate their partnership.The trial balance at this date was as follows: The partners planned a program of piecemeal conversion of the business assets to minimize liquidation losses.All available cash,less an amount retained to provide for future expenses,was to be distributed to the partners at the end of each month.A summary of liquidation transactions follows: -Prepare a schedule to calculate the safe installment payments to be made to the partners at the end of February.

What is the preferred method of resolving a partner's deficit balance,according to the Uniform Partnership Act?

REFERENCE: Ref.15_04 The balance sheet of Rogers,Dennis & Berry LLP prior to liquidation included the following: The three partners shared net income and losses in a 5:3:2 ratio,respectively.Noncash assets were sold for $60,000.Creditors were paid in full,partners were paid $35,000,and the balance of cash was retained pending future developments. -Determine the cash to be retained and prepare a schedule to distribute $35,000 cash to the partners.

The marshaling of assets doctrine regulates claims against an individual's assets.The following lists groups interested in potential cash distributions. (1) )those owed to the creditors of the partnership (2) )those owed to separate creditors (3) )those owed to partners by way of contribution When a partner is bankrupt,which order do claims against their property rank?

REFERENCE: Ref.15_03 Hardin,Sutton,and Williams has operated a local business as a partnership for several years.All profits and losses have been allocated on a 3:2:1 ratio,respectively.Recently,Williams has undergone personal financial problems,and is insolvent.To satisfy Williams' creditors,the partnership has decided to liquidate. The following balance sheet has been produced: During the liquidation process,the following transactions take place: - Noncash assets are sold for $116,000. - Liquidation expenses of $12,000 are paid.No further expenses are expected. - Safe capital distributions are made to the partners. - Payment is made of all business liabilities. - Any deficit capital balances are deemed to be uncollectible. -Develop a predistribution plan for this partnership,assuming $12,000 of liquidation expenses are expected to be paid.

REFERENCE: Ref.15_03 Hardin,Sutton,and Williams has operated a local business as a partnership for several years.All profits and losses have been allocated on a 3:2:1 ratio,respectively.Recently,Williams has undergone personal financial problems,and is insolvent.To satisfy Williams' creditors,the partnership has decided to liquidate. The following balance sheet has been produced: During the liquidation process,the following transactions take place: - Noncash assets are sold for $116,000. - Liquidation expenses of $12,000 are paid.No further expenses are expected. - Safe capital distributions are made to the partners. - Payment is made of all business liabilities. - Any deficit capital balances are deemed to be uncollectible. -Jones,Marge,and Tate LLP decided to dissolve and liquidate the partnership on September 31,2009.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.

The partnership of Rayne,Marin,and Fulton was being liquidated by the partners.Rayne was insolvent and did not have enough assets to pay all of his personal creditors.Under what conditions might Rayne's personal creditors have claimed some of the partnership assets?

The Keaton,Lewis,and Meador partnership had the following balance sheet just before entering liquidation: Keaton,Lewis,and Meador share profits and losses in a ratio of 2:4:4.Noncash assets were sold for $180,000.Liquidation expenses were $10,000. Assume that Lewis was personally insolvent and could not contribute any assets to the partnership,while Keaton and Meador were both solvent.What amount of cash would Keaton have received from the distribution of partnership assets?

.The following account balances were available for the Perry,Quincy,and Renquist partnership just before it entered liquidation: Perry,Quincy,and Renquist had shared profits and losses in a ratio of 2:4:4.Liquidation expenses were expected to be $8,000. Assume that Quincy was insolvent and could not contribute assets to cover any deficit in her capital account.For what amount must the noncash assets have been sold,so that Renquist would have received some cash from the liquidation?

REFERENCE: Ref.15_03 Hardin,Sutton,and Williams has operated a local business as a partnership for several years.All profits and losses have been allocated on a 3:2:1 ratio,respectively.Recently,Williams has undergone personal financial problems,and is insolvent.To satisfy Williams' creditors,the partnership has decided to liquidate. The following balance sheet has been produced: During the liquidation process,the following transactions take place: - Noncash assets are sold for $116,000. - Liquidation expenses of $12,000 are paid.No further expenses are expected. - Safe capital distributions are made to the partners. - Payment is made of all business liabilities. - Any deficit capital balances are deemed to be uncollectible. -Prepare journal entries to record the actual liquidation transactions.

The Henry,Isaac,and Jacobs partnership was about to enter liquidation with the following account balances: Estimated expenses of liquidation were $5,000.Henry,Isaac,and Jacobs shared profits and losses in a ratio of 2:4:4. Before liquidating any assets,the partners determined the amount of cash available for safe payments.How should the cash be distributed?

REFERENCE: Ref.15_05 The partners of Donald,Chief & Berry LLP decided to liquidate on August 1,2009.The balance sheet of the partnership is as follows,with the income-sharing ratio of 25%,45%,30% respectively. The disposal of other assets with a carrying amount of $200,000 realized $140,000,and all available cash was distributed. -Prepare the schedule to compute the cash payments to the partners.

Which of the following is the proper ranking order of property distributions stipulated by the Uniform Partnership Act?

The Albert,Boynton,and Creamer partnership was in the process of liquidating its assets and going out of business.Albert,Boynton,and Creamer had capital account balances of $80,000,$120,000,and $200,000,respectively,and shared profits and losses in the ratio of 1:3:2.Equipment that had cost $90,000 and had a book value of $60,000 was sold for $24,000. Required: Prepare the appropriate journal entry.

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

A local partnership has assets of cash of $5,000 and a building worth $80,000.All liabilities have been paid and the partners are all insolvent.The partners capital accounts are as follows Harry $40,000,Landers $30,000 and Waters 15,000.The partners share profits and losses 4:4:2.If the building is sold for $50,000,how much cash will Harry receive in the final settlement?