Question

SELECT THE BEST ANSWERS (Shows computations and references are required) Use the following information to answer the question(s) below. Lola, Melvin, and Nettie are in the process of liquidating their partnership. Since it may take several months to convert the other assets into cash, the partners agree to distribute all available cash immediately, except for $12,000 that is set aside for contingent expenses. The balance sheet and residual profit and loss sharing percentages are as follows: $ Cash Other assets 500,000 225,000 Accounts payable Lola, capital (20%) Melvin, capital (30%) Nettie, capital (50%) Total liab./equity 168,000 270,000 62.000 $_725,000 Total assets $_ 725,000 1. Using a cash pre-distribution, how much cash should Melvin receive in the first distribution? A) $ 81,000 B) $165,000 C) $168,600 D) $202,500 2. Using a cash pre-distribution, how much cash should Lola receive in the first distribution? A) $ 81,000 B) $ 98,000 C) $168,600 D) $202,500 3. In partnership liquidations, what are safe cash pre-distribution payments? A) The amounts of distributions that can be made to the partners, after all creditors have been paid in full. B) The amounts of distributions that can be made to the partners with assurance that such amounts will not have to be returned to the partnership. C) The amounts of distributions that can be made to the partners, after all non-cash assets have been adjusted to fair market value. D) The amounts of distributions that can be made to the partners during the liquidation based on the partner's contributed capital return.

Answer 1

The cash distribution is done to all partners after making the contingent expenses and making the payment of liabilities such as creditors, bills payable etc. the partner will their get their payment at the end. This is done at the time of liquidation of the partnership.

10 cash pre-distribution plan particular I cola melvip Nettie Capital (shcanta (al capital 6 Balance 168000 220000 62000 - 2 profit sharing ratio 3Unit capital (1/2) 2 3 5 184,000 90000 | 12,4001 4) Base capital CAS lowest amount) (12,400X2) (12,400 x3) (12.400 Xs) (24, 800 37,200 62,000 - Excess capital (1-4) 143,200 232,800 MIL - 6 profit sharing ratio 2 11 3 _ 7) unit capital (516) 71.600 77,600 1143,200 Base capital Car Cowest amount) (76600 X2) (71, 600 X 3 9) Excess capital (5-8) |214,800 18000 nii (a) pay & 18000 to melvin 6 Then Barana amount dishbute to 3:2 @ Then Rasana omouw dishbate to 3: 2:5

teistribution of cash particular cash Account Lola melvin Nettie Ralance payable capital (al capitan (s/ capital (1) Balance 500000 225000 168,000 270,000 62.000 less: contigent(2000 Expenses 4,85.000 Jessi payment for(22500] 28/225000) Account payable Balance 263000 MIL less payment 18000 18000 to melvin 245000 252000 less payment temety9 T 48ood c oop.se Lemeste to cola 1980ood capital (215) 1147000 capital (315) Ralance 1 on 170,ooo losooo 62.000 (1) Melvin showd receive the first distribution Erst payment second payment first dislibution $ 18000 $147,000 s1650ool - so comect Answer is option (B) ar $ 165000 - 2 Lola should receive the hist distribution payment form distribution 30 (calculated Above) as 898.000 iso correct answer is option

correct Answer A The amount of distribution that can be made to the parties after all creditors have been paid in full is correct answer.because after paying the Liabilities balance amount is dish beated to partners. Incorrect answers. (6 This is in correct option because there is no assurana of returning cimount to pastbership (c Thie ophion (o is also in correct because frost cash is distributed there is no adjustment Lis done of non- cash assets at frein market value (6) The option col is in correct because liquidata is not done on the basis of parther's Capital return.