Exam 15: Partnerships: Termination and Liquidation

White, Sands, and Luke has the following capital balances and profit and loss ratios: $60,000 (30%); $100,000 (20%); and $200,000 (50%). The partnership has received a predistribution plan. How would $200,000 be distributed?

Gonda, Herron, and Morse is considering possible liquidation because partner Morse is personally insolvent. The partners have the following capital 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?

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?

A partnership held three assets: Cash, $13,000; Land, $45,000; and a Building, $65,000. There were no recorded liabilities. The partners anticipated that expenses required to liquidate their partnership would amount to $6,000. Capital balances were as follows: The partners shared profits and losses 30:30:20:20, respectively. Required: Prepare a proposed schedule of liquidation, showing how cash could be safely distributed to the partners at this time.

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

Jones, Marge, and Tate LLP decided to dissolve and liquidate the partnership on September 30, 2011. 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.

Which item is not shown on the schedule of partnership liquidation?

A local partnership was considering the possibility of liquidation since one of the partners (Ding) was personally insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively. Creditors of partner Ding filed a $25,000 claim against the partnership's assets. At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time. If the assets could be sold for $228,000, what is the minimum amount that Ding's creditors would have received?

White, Sands, and Luke has the following capital balances and profit and loss ratios: $60,000 (30%); $100,000 (20%); and $200,000 (50%). The partnership has received a predistribution plan. How would $90,000 be distributed?

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. Record the journal entry for payment of outstanding liabilities to the creditors.

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

A local partnership was considering the possibility of liquidation since one of the partners (Ding) was personally insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively. Creditors of partner Ding filed a $25,000 claim against the partnership's assets. At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time. If the assets could be sold for $228,000, what is the minimum amount that Laurel's creditors would have received?

The Amos, Billings, and Cleaver partnership had two assets: (1) cash of $40,000 and (2) an investment with a book value of $110,000. The ratio for sharing profits and losses is 2:1:1. The balances in the capital accounts were: Required: If the investment was sold for $80,000, how much cash would each partner have received?

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 his personal creditors. Under what conditions might Rayne's personal creditors have claimed some of the partnership assets?

As of January 1, 2011, the partnership of Canton, Yulls, and Garr had the following account balances and percentages for the sharing of profits and losses: The partnership incurred losses in recent years and decided to liquidate. The liquidation expenses were expected to be $10,000. What would be the maximum amount Garr might have to contribute to the partnership to eliminate a deficit balance in his account?

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. Record the journal entry for the sale of the noncash assets.

What is the purpose of a predistribution plan?

What is the role of the accountant during the liquidation process?

A local partnership has assets of cash of $130,000 and land recorded at $700,000. All liabilities have been paid and the partners are all personally insolvent. The partners' capital accounts are as follows Roberts, $500,000, Ferry, $300,000 and Mones, $30,000. The partners share profits and losses 5:3:2. If the land is sold for $450,000, how much cash will Roberts receive in the final settlement?

What is a safe cash payment?