Exam 15: Partnerships: Termination and Liquidation

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: Dancey, capital \ 72,000 Reese, capital 32,000 Newman, capital 52,000 Jahn, capital 24,000 Which one of the following statements is true for a predistribution plan?

Before liquidating any assets, the partners determined the amount of cash available for safe payments. How should the amount of safe cash payments be distributed?

What would be the maximum amount Garr might have to contribute to the partnership to eliminate a deficit balance in his account?

The partners of Donald, Chief & Berry LLP decided to liquidate on August 1, 2011. The balance sheet of the partnership is as follows, with the profit and loss ratio of 25%, 45%, and 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 journal entry for Donald, Chief & Berry LLP on August 1, 2011, to record the offset of the loan receivable from Donald.

On January 1, 2011, 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: Debit Credit Cash \ 23,400 Accounts Receivable 85,800 Inventory 67,600 Machinery and equipment, net 245,700 Won, loan Accounts payable \ 68,900 Cadel, loan 26,000 Won, capital 153,400 Cadel, capital 117,000 Dax capital 96,200 Totals \ 461,500 \ 461,500 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: January \ 66,300 was collected on the accounts receivable; the balance was deemed to be uncollectible. \ 49,400 was received for the entire inventory. \ 2,600 in liquidation expenses were paid. \ 65,000 was paid to outside creditors, after receiving a \ 3,900 credit memo from a creditor on January 11 Cash of \ 13,000 was retained at the end of the month to cover unrecorded liabilities and anticipated expenses. The balance of cash was distributed to the partners. February \ 3,900 in liquidation expenses were paid. \ 7,800 in cash was retained at the end of the month to cover unrecorded liabilities and anticipated expenses. March \ 189,800 was received on the sale of all machinery and equipment. \ 6,500 in final liquidation expenses were paid. No cash was retained as all cash was distributed to partners. -Prepare a schedule to calculate the safe payments to be made to the partners at the end of January.

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?

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: Answer: Cash \ 80,000 Noncash assets 205,000 Liabilities 47,000 Canton, capital (30\%) 138,000 Yulls, capital (40\%) 119,500 Garr, capital (30\%) (19,500) The partnership incurred losses in recent years and decided to liquidate. The liquidation expenses were expected to be $10,000. -How much of the existing cash balance could be distributed safely to partners at this time?

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?

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: Amos, capital: $45,000 Billings, capital: $75,000 Cleaver, capital: $30,000 Required: If the investment was sold for $80,000, how much cash would each partner have received?

Harding, Jones, and Sandy is in the process of liquidating and the partners have the following capital 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 to immediately receive $20,000 in cash that is available. How should this cash be distributed?

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 Mones receive in the final settlement?

Why is a Schedule of Liquidation prepared?

The partners of Donald, Chief & Berry LLP decided to liquidate on August 1, 2011. The balance sheet of the partnership is as follows, with the profit and loss ratio of 25%, 45%, and 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.

The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation: Cash \ 100,000 Liabilities \ 40,000 Noncash assets Keaton, Capital 90,000 Lewis, Capital 60,000 Meador, Capital Total \ Total \ Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for $60,000. How much will each partner receive in the liquidation? Keaton Lewis Meador A) \ 40,000 \ 26,667 \ 53,333 B) \ 24,000 \ 48,000 \ 48,000 C) \6 0,000 \0 \6 0,000 D) \0 \0 \1 20,000 E) \3 6,000 \1 2,000 \7 2,000

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 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 cash. Required: Prepare the appropriate journal entry to record the sale of the equipment, distributing any gain or loss directly to the partners.

What is the purpose of a predistribution plan?

The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation: Cash \ 100,000 Liabilities \ 40,000 Noncash assets 210,000 Keaton, Capital 90,000 Lewis, Capital 60,000 Meador, Capital Total \ Total \ Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. The partnership feels confident it will be able to eventually sell the noncash assets and wants to distribute some cash before paying liabilities. How much would each partner receive of a total $60,000 distribution of cash? Keaton Lewis Meador A) \ 40,000 \ 0 \ 20,000 B) \ 12,000 \ 24,000 \ 24,000 C) \ 20,000 \ 13,333 \ 26,667 D) \ 60,000 \ 0 \ 20 E) \ 10,000 \ 0 \ 50,000

If the assets could be sold, for $228,000 what is the minimum amount that Tillman's creditors would have received?

A partnership had the following account balances: Cash, $91,000; Other Assets, $702,000; Liabilities, $338,000; Polk, Capital (50% of profits and losses), $221,000; Garfield, Capital (30%), $143,000; Arthur, Capital (20%), $91,000. The company liquidated and $10,400 became available to the partners. Required: Who would have received the $10,400?