Question

The balance sheet for the Delphine, Xavier, and Olivier partnership follows:

Cash	$	70,800		Liabilities	$	47,500
Noncash assets		130,000		Delphine, capital		74,700
				Xavier, capital		55,000
				Olivier, capital		23,600
Total assets	$	200,800		Total liabilities and capital	$	200,800

Delphine, Xavier, and Olivier share profits and losses in the ratio of 4:4:2, respectively. The partners have agreed to terminate the business and estimate that $15,000 in liquidation expenses will be incurred.

What is the amount of cash that safely can be paid to partners prior to liquidation of noncash assets?

Which partner should receive the cash distribution from (a)?

Answer 1

Answer

1.

Cash available = Cash – Liquidation expenses – Liabilities

Cash available = $8,300 ($70,800 – 15,000 – 47,500)

2.

We will give the above money to that partner who has highest capital in the business, i.e. in our case its Delphine.

So we will give the above money to Delphine.

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