Question

The partnership of Hendrick, Mitchum, and Redding has the following account balances:

Cash	$	50,000			Liabilities	$	30,000
Noncash assets		135,000			Hendrick, capital		100,000
					Mitchum, capital		70,000
					Redding, capital		(15,000	)

This partnership is being liquidated. Hendrick and Mitchum are each entitled to 40 percent of all profits and losses with the remaining 20 percent going to Redding.

1. What is the maximum amount that Redding might have to contribute to this partnership because of the deficit capital balance?

2. How should the $20,000 cash that is presently available in excess of liabilities be distributed?

3. If the noncash assets are sold for a total of $50,000, what is the minimum amount of cash that Hendrick could receive?

Answer 1

From the given information Partners sharing ratio are 4:4:2.

Given problem we can solve through Realisation A/C, Cash A/C and Partners Capital A/C.

In capital account, H- Hendrick, M- Mitchum, R- Redding.

Redding have to contribute to Partnership because of the deficit capital balance is $32,000 as balancing figure showed in Capital above.

Excess of $20,000 is distributed between Hendrick ans Mitchum. Cash distribution between partners can be understood by taking view of capital account which i attached above.

Minimum amount of cash that Hendrick could receive is $66,000 (including cash excess of liabilities) as balancing figure showed in Capital account above.