Exam 15: Partnerships: Termination and Liquidation

A local partnership was in the process of liquidating and reported the following capital balances: Justice, capital (40\% share of all profits and losses ) \ 23,000 Zobart, capital (35\%) 22,000 Douglass, capital (25\%) (14,000) Douglass indicated that the $14,000 deficit would be covered by a forthcoming contribution. However, the two remaining partners asked to receive the $31,000 that was then in the cash account. -How much of this money should Justice receive?

The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet: Cash \ 16,000 Liabilities \ 150,000 Noncash assets 434,000 Abrams, capital 80,000 Bartle, capital 90,000 Creighton, capital 130,000 Total Total \ 450,000 Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000. After the liquidation expenses of $12,000 were paid and the noncash assets sold, Creighton had a deficit of $8,000. For what amount were the noncash assets sold?

What financial schedule would be prepared for a partnership that has begun liquidation but has not yet completed the process? What is the purpose of this schedule?

The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances: Cash \ 90,000 Liabilities \ 60,000 Noncash assets 300,000 Henry, capital 80,000 Isaac, capital 110,000 Jacobs, capital 140,000 Total \ 390,000 Total \ 390,000 Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. -What amount of cash was available for safe payments, based on the above information?

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

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. Ding, capital \ 60,000 Laurel, capital 67,000 Ezzard, capital 17,000 Tillman, capital 96,000 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?

A local partnership has assets of cash of $5,000 and a building recorded at $80,000. All liabilities have been paid. 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?

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 payment of liabilities.

Hardin, Sutton, and Williams has operated a local business as a partnership for several years. All profits and losses have been allocated in 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.

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

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 March.

The balance sheet of Rogers, Dennis & Berry LLP prior to liquidation included the following: Cash \ 40,000 Noncash assets 80,000 Liabilities 20,000 Loan Payable to Rogers 10,000 Rogers, Capital 35,000 Dennis, Capital 30,000 Berry, Capital 25,000 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.

The following account balances were available for the Perry, Quincy, and Renquist partnership just before it entered liquidation: Cash \ 90,000 Liabilities \ 170,000 Noncash assets 300,000 Perry, capital 70,000 Quincy, capital 50,000 Renquist, capital 100,000 Total Total Inlcuded in Perry's capital balance is a $20,000 partnership loan owed to Perry. Perry, Quincy, and Renquist shared profits and losses in a ratio of 2:4:4. Liquidation expenses were expected to be $15,000. All partners were solvent. -What amount would noncash assets need to be sold for in order for any partner to receive some cash?

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? White Sands Luke A) \ 60,000 \ 40,000 \ 100,000 B) \ 6,000 \ 44,000 \ 150,000 C) \ 48,148 \ 65,432 \ 86,420 D) \ 12,000 \ 68,000 \ 120,000 E) \ 60,000 \ 100,000 \ 40,000

How much of this money should Zobart receive?

The balance sheet of Rogers, Dennis & Berry LLP prior to liquidation included the following: Cash \ 40,000 Noncash assets 80,000 Liabilities 20,000 Loan Payable to Rogers 10,000 Rogers, Capital 35,000 Dennis, Capital 30,000 Berry, Capital 25,000 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 cash distribution to the partners.

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

When a partnership is insolvent and a partner has a deficit capital balance, that partner is legally required to:

A schedule should be produced periodically by the accountant to disclose losses and gains that have been incurred, remaining assets and liabilities, and current capital balances::The schedule of liquidation

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