Bilbo, Frodo and Gandoff have had a successful law practice for many years, but
ID: 2473798 • Letter: B
Question
Bilbo, Frodo and Gandoff have had a successful law practice for many years, but have decided to retire and move to Rivendale. On January 1, 2015 when the 3 of them decided to terminate the partnership they had the following balance sheet:
Cash $50,000
A/R $90,000
Supplies $40,000
Equipment (net) $100,000
Building (net) $400,000
Land $300,000
Note payable $200,000
Accounts payable $200,000
Gandoff capital $80,000
Bilbo capital $300,000
Frodo capital $600,000
They share profits and losses equally.
On April 30th the partnership sold off the building for $150,000 and paid off the note payable. (remember, Frodo took any safe payments he was entitled to in February and March but that Gandoff and Bilbo took no safe payments). ASSUME THAT ANY PARTNER WITH A NEGATIVE CAPITAL BALANCE CAN COVER THEIR SHORTAGE HOW MUCH DOES EACH PARTNER GET OR CONTRIBUTE TO THE PARTNERSHIP AT LIQUIDATION?
USING THE SAME INFORMATION AS E, EXCEPT THAT ANY PARTNER WITH A NEGATIVE CAPITAL BALANCE CANNOT COVER THEIR SHORTAGE; HOW MUCH DOES EACH PARTNER RECEIVE AT LIQUIDATION?
Explanation / Answer
total liability
Note payable $200,000
Accounts payable $200,000
$400,000
less: liability paid
Cash ($50,000)
Building ($150,000)
total $200,000
totall loss $200,000 deduct from partner capital
Partners get at liquidation
Gandoff capital $80,000 less loss 66,667 = 13,333
Bilbo capital $300,000 less loss 66,667 = 233,333
Frodo capital $600,000 less loss 66,666 = 533,334
Note; no iformationavailable sale of other assets.
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