The partnership of Butler, Osman, and Ward was formed several years as a local t

Question

The partnership of Butler, Osman, and Ward was formed several years as a local tax preparation firm. Two partners have reached retirement age and the partners have decided to terminate operations and liquidate the business. Liquidation expenses of $56,000 are expected. The partnership balance sheet at the start of liquidation is as follows Cash Accounts receivable Office equipment (net) Building (net) Land Totalassets $ 192,000 52,000 160,000 52,000 180,000 $ 636,000 $ 52,000 Liabilities 82,000 72,000 220,000 210,000 $ 636,000 Butler, loan Butler, capital Osman, capital (25%) Ward, capital (50%) (25%) Total liabilities and capital Prepare a predistribution plan for this partnership Butler, Loan Osman, and Capital Capital Ward Capital Beginning balances Loss Step one balances Loss Step two balances

Explanation / Answer

Butler Osman Ward Ratio 1 1 2 Capital Balance 160000 52000 180000 Distribution is ratio (1:1:2) 52000 52000 104000 Balance 108000 0 76000 Distribution is ratio (1:0:2) 38000 0 76000 Balance 70000 0 0 First Distribution 70000 will be paid to butler Next 104000 paid to butler and Ward in ratio 1:2 Balance in ratio 1:1:2

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