A local partnership is considering possible liquidation because one of the partn

Question

A local partnership is considering possible liquidation because one of the partners (Bell) is insolvent. Capital balances at the current time are as follows. Profits and losses are divided on a 4:3:2:1 basis, respectively.

Bell, capital $ 81,000

Hardy, capital 68,000

Dennard, capital 17,000

Suddath, capital 92,000

Bell’s creditors have filed a $33,000 claim against the partnership’s assets. The partnership currently holds assets reported at $420,000 and liabilities of $220,000. If the assets can be sold for $250,000, what is the minimum amount that Bell’s creditors would receive?

Explanation / Answer

Bell Hardy Dennard Suddath 4 3 2 1 Reported Balance 81000 68000 17000 92000 Loss on sale of asset 170000 in 4:3:2:1 -44000 -33000 -22000 -11000 Adjusted balance 37000 35000 -5000 81000 Potential Loss from Dennard spilt on the basis of 4: 3:1 -2500 -1875 5000 -625 Cash Distribution 34500 33125 0 80375 Bell creditors will get all their dues of $33000 as Bell will get $34500 from cash distribution out of which his creditors will get $33000

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