The following balance sheet is for a local partnership in which the partners hav
ID: 2492964 • Letter: T
Question
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other.
Cash $ 53,000, Land 195,000, Building 185,000, Total assets $433,000
Liabilities $ 43,000, Adams, capital 124,500, Baker, capital 45,000, Carvil, capital 86,000, Dobbs, capital 134,500, Total liabilities and capital $433,000
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 $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 2:3:3:2 basis, respectively, how will the $10,000 be divided?
b. The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated on a 2:2:3:3 basis, respectively, how will the $10,000 be divided?
c. The building is immediately sold for $98,000 to give total cash of $151,000. The liabilities are then paid, leaving a cash balance of $108,000. 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.)
d. 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.) Maximum amount of sale value =
Explanation / Answer
ANSWER- A
ADAM= 10000 * 2/10 = 2000
BAKER=10000 * 3/10= 3000
CARVIL=10000 *3/10= 3000
DOBBS=10000*2/10= 2000
ANSWER- B
ADAM= 10000*2/10= 2000
BAKER=10000*2/10=2000
CARVIL=10000*3/10=3000
DOBBS=10000*3/10=3000
ANSWER- C
ADAM= 108000*1/10= 10800
BAKER=108000*3/10= 32400
CARVIL=108000*3/10= 32400
DOBBS=108000*3/10= 32400
ANSWER D- Cash from selling Buliding= 98000
Calculation of Sale of Land= Total Assets - distributed cash ( Building+ cash)
433000 - 226000(98000+20000+108000) = $207000
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