The Keaton, Lewis, and Meador partnership had the following balance sheet just b

Question

The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation: Cash 10,000 non cash assets 300000 total 310,000 liability 130000 keaton-60,000 lewis-40,000 meador-80,000 total:310000 Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for $180,000. Liquidation expenses were $10,000. Assume that Lewis was personally insolvent and could not contribute any assets to the partnership, while Keaton and Meador were both solvent. What amount of cash would Keaton have received from the distribution of partnership assets? the answer should be 30,000 please explain and show your work,I spent long time on it but stil do not understand. Thank you!!

Explanation / Answer

Answer:

$ 30,000 is correct answer. First of all we need to calculate liquidation loss by preparing liquidation account of partnership.

Loss from liquidation = Less realization of cash from non-cash assets + Liquidation expenses

= 300,000 - 180,000 + 10,000 = $130,000

Or it can be calculated by preparing liquidation accounts which is as follows-

Now partners final allocation can be prepared in below manner.

Amount in $

$30,000 would Keaton have received from the distribution of partnership assets.

Accounts Amount $ Accounts Amount $ Cash from non cash assets          180,000 Liquidation expenses      10,000 Liabilities          130,000 Non cash assets    300,000 Loss on liquidation          130,000 Cash towards liabilities    130,000          440,000    440,000

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