Question

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The following balance sheet is for a local partnership in which the partners have become very unhappy with each other. $ Cash Land Building 45,000 155,000 145,000 Liabilities Adams, capital Baker, capital Carvil, capital Dobbs, capital Total liabilities and capital $ 35,000 97,000 36,000 70,000 107,000 $ 345,000 Total assets $ 345,000 To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as an independent situation related to the partnership's liquidation. a. The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 2:3:32 basis, respectively, how will the $10,000 be divided? b. The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated on a 2:2:3.3 basis, respectively, how will the $10,000 be divided? c. The building is immediately sold for $75,000 to give total cash of $120,000. The liabilities are then paid, leaving a cash balance of $85,000. This cash is to be distributed to the partners. How much of this money will each partner receive if profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 1:3:3:3 basis, respectively? (Do not round intermediate calculations.) d. Assume that profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 1:3:4:2 basis, respectively. How much money must the firm receive from selling the land and building to ensure that Carvil receives a portion? (Do not round intermediate calculations.) a. Adams Baker Carvil Dobbs Adams Baker Carvil Dobbs Adams Baker Carvil Dobbs d. Minimum amount of sale value

Answer 1

Solution Nwl In the giren situation profit and loss of Sharing ratio partners follows; are as Adams : 2 Baker 3 Carvil Dobbs : Therefore, $ 19ooo should be allocated as follows Adams: $10,000 x 2 = 10 Baker : $1900 3 - $ 3000 $ w 2000 $ 3000 caruil : $ 10,000 x 3 = 10 Dobbs : $ 10,000 - $ 2000 To

b. In case, if the profit and loss Caring roso of partners are; Agu 2 Boter : 2 Covil 3 Doble :3 In this case B 10,000 will be divided as follows; 1o00oX 2 $ 2000 = $ 2000 10,000*2 Barns : - $ 3000 $ 10000 v3 Convil: 10 = $ 3000 Dobbs : $ 1000 x3

a. Solution In case building is sold for $ 75000 and liabilities are paid then net cash available would be $ 85,000. If the profit and loss sharing ratio of pasmers are as follows: towwe the will receive Adams: 1 Baker: 3 Convil : 3 Dobbs : 3 Then, each partner following amount Adams: $8500 lo Baxer: $85000 x 3 . $ 8500 $ 85000 x 1 = $ 2$500 To 3 $ 25, 500 : $ 85000 x 3 comvil 10 = $ 25, 5oo $85000 x 3 10 $85000 a Dobbs

capital Inte of Solution d. In the Carvil be 4 . 10 case question, is $ 70,000 In order to make corvil receive any Portion of money, his share of proft should be anything above $ 70,000. In the given situation partner's profit and loss sharing ratio is Adams, Baker, carvil and Dobbs = 1: 3: 4:2 respectively. Therefore carvil ratio will be 4 Therefore net abet of the partnership should be anything above $70,000x 10 = $175000 As we know net asset of the parmeship would be. - Net - Total Asset liabilities Abet in $ 145000 = Cash & (landt Building a liabilikes let londt building be sx | 0 LS0 00 11 $35000 $195000 = $450 oC X = $ 165000 conclusion. Therefore to make Carvil receive any portion from should receive above $ 165000 by selling anything land and building