Question

The Drysdale, Koufax, and Marichal partnership has the following balance sheet immediately prior to liquidation: Cash Noncash assets $ 56,000 304,000 Liabilities Drysdale, loan Drysdale, capital (503) Koufax, capital (30%) Marichal, capital (203) $ 57,500 32,500 100,000 90,000 80,000 a-1. Determine the maximum loss that can be absorbed in Step 1. Then, assuming that this loss has been incurred, determine the next maximum loss that can be absorbed in Step 2. a-2. Liquidation expenses are estimated to be $16,000. Prepare a predistribution schedule to guide the distribution of cash. Further, modify the tags in explanation as well. b. Assume that assets costing $94,000 are sold for $70,000. How is the available cash to be divided? Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Reg B Determine the maximum loss that can be absorbed in Step 1. Then, assuming that this loss has been incurred, determine the next maximum loss that can be absorbed in Step 2. Partner Capital Balance Loss Allocation Maximum Loss That Can Be Absorbed % % Step 1 Drysdale Koufax Marichal Step 2 Koufax Marichal % % %

Answer 1

Maximum loss absorbtioin Capital Balance+ Partner Loan Loss Allocation% Step 1 Drysdele 132500 50 % Kaufax 90000 30/% Marichal 80000 20/% Step 2 Maximum loss that can be absorbed 320000 16000001 96000 64000 Drysdele Kaufax Marichal 132500 90000 50 % 30/% 20/% 250000 125000 75000 50000 80000

DRYSDALE KAUFAX AND MARICHAL Distribution of available cash 56000 Liablities First 56000 Next 1500 70000 Liabilities Liquidation expense Drysdele Kaufax Marichal 70000 Total 16000 7500 15000 30000 70000 Total

Cash Available for Distribution Beginning balance of cash 56000 Sale of non cash assets 70000 Sub total 126000 Payment of liabilities 57500 Payment of liquidation expense 16000 Cash available for distribution 52500

Cash distribution to partners Drysdele Kaufax Marichal First Next 7500 15000 30000 Next Total 7500 15000 30000

Computation of Safe payment Drysdele Kaufax Marichal Total Capital balance 132500 90000 80000 Less maximum loss 125000 75000 50000 Safe payment 7500 15000 30000 302500 250000 52500

Note. For capital of Drysdele Loan is added.