Question

The VWX Partnership is undergoing an installment liquidation. Partners Victor, Whitney and Xavier share income in a 3:5:2 ratio. The partnership balance sheet is as follows:

Assets

Cash - 7,000

AR - 10,000

Loan Rcvable (Victor) - 13,000

Inventory - 25,000

Buildings and equipment, net - 545,000

TOTAL ASSETS - 600,000

Liabilities

AP - 20,000

Loan Payable (Whitney) - 50,000

TOTAL LIABILITIES - 70,000

Capital

Victor - 100,000

Whitney - 250,000

Xavier - 180,000

TOTAL CAPITAL - 530,000

Your are preparing a cash distribution plan for the partnership.

If $249,000 is available to distribute TO THE PARTNERS, how is it distributed?

A- $249,000 to Xavier

B- $135,000 to Whitney and $114,000 to Xavier

C- $40,000 to Victor, $160,000 to Whitney, and $49,000 to Xavier

D- $125,000 to Whitney and $124,000 to Xavier

Answer 1

	Victor	Whitney	Xavier
PSR	3	5	2
				Total
Capital due to Partners	$1,00,000	$ 2,50,000	$ 1,80,000	$                   5,30,000
Loan receivable	$ -13,000
Loan payable		$     50,000
Total money o/s	$   87,000	$ 3,00,000	$ 1,80,000	$                   5,67,000
Less: Loss share in firm	$ -95,400	$-1,59,000	$    -63,600
Cash to be distributed	$    -8,400	$ 1,41,000	$ 1,16,400
Loss of Victor to be shared in PSR (i.e. 5:2)		$      -6,000	$      -2,400
Cash to be distributed		$ 1,35,000	$ 1,14,000
Cash available	$2,49,000
Cash available for distribution to partners	$2,49,000
Capital due to Partners	$5,67,000
Loss to Firm	$3,18,000
Victor's share	$   95,400	318000*3/10
Whitney's share	$1,59,000	318000*5/10
Xavier's share	$   63,600	318000*2/10

Correct answer is b) $ 135,000 to Whitney and $ 114,000 to Xavier

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