Question

A local partnership is considering possible liquidation because one of the partners (Bell) is insolvent. Capital balances at the current time are as follows. Profits and losses are divided on a 4:3:2:1 basis, respectively.

Bell, capital	$	91,000
Hardy, capital		81,000
Dennard, capital		18,000
Suddath, capital		96,000

Bell’s creditors have filed a $37,000 claim against the partnership’s assets. The partnership currently holds assets reported at $460,000 and liabilities of $174,000. If the assets can be sold for $270,000, what is the minimum amount that Bell’s creditors would receive?

rev: 11_14_2016_QC_CS-69776

Answer 1

CALCULATION OF SALE OF ASSETS

Assets Value	$460,000
LESS:
Sales Value	$270,000
LOSS ON SALE	$190,000

Allocation for Loss in Capital and after allocation balance to each partner

PARTNER NAME	CAPITAL BALANCE	P&L ALLOCATION RATIO	LOSS ALLOCATION	CAPITAL BALANCE AFTER ALLOCATION
Bell	$91,000	4	$76,000	$15,000
Hardy	$81,000	3	$57,000	$24,000
Dennard	$18,000	2	$38,000	($20,000)
Suddath	$96,000	1	$19,000	$77,000
	$286,000	10	$190,000	$96,000

Hence, after the calculation given above, it is clear that Bell creditors will receive $15,000

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