Question

The following balance sheet is for a local partnership in which the partners have become very unhappy with each other. Cash Land Building $ 52,000 190,000 180,000 IBILE Liabilities $ 42.000 Adams, capital 120,500 Baker, capital 45,000 Carvil, capital 84,000 Dobbs, capital 130,500 Total liabilities and capital $422,000 Total assets $422,000 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 building is immediately sold for $97,000 to give total cash of $149,000. The liabilities are then paid, leaving a cash balance of $107,000. 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.) Adams 20500 Dobos 84,800 107.000 b. 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. Total L + B value - 270,000 licb= 42,00 cash -52uo cash after liab - $10,00

Answer 1

A)
	cash available	$ 52,000
	add: cash received from sale of building	$ 97,000
	total cash available	$ 149,000
	less: liabilities paid	($ 42,000)
	balance cash	$ 107,000
	this balance cash is distributed to all partner in their profit sharing ratio 1:3:3:3
	Adams capital ( $ 107,000 * 10% )	$ 10,700
	Baker capital ( $107,000 * 30 % )	$ 32,100
	Carvil capital ( $ 107,000 *30 % )	$ 32,100
	Dobbs capital ( $ 107,000 * 30 % )	$ 32,100
B)
		Adams	Baker	Carvil	Dobbs
	Capital balance	$ 120,500	$ 45,000	$ 84,000	$ 130,500
	Profit sharing ratio	10%	30%	40%	20%
	maximum loss each can suffer	$ 1,205,000	$ 150,000	$ 210,000	$ 652,500
		($ 120,500*100/10)	($ 45,000*100/30)	($ 84,000*100/40)	($ 130,500*100/20)
	so, $ 210,000 distributed to all partners in their profit sharing ratio ( 1:3:4:2)
	amount $ 210,000	$ 21,000	$ 63,000	$ 84,000	$ 42,000
		( $ 210,000 *10%)	( $ 210,000 *30%)	( $ 210,000 *40%)	( $ 210,000 *20%)
	so, land and building should be sold for $ 210,000   and Carvil will receives a portion is $ 84,000