The following balance sheet is for a local partnership in which the partners hav
ID: 2499747 • Letter: T
Question
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other.
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.
The building is immediately sold for $95,000 to give total cash of $145,000. The liabilities are then paid, leaving a cash balance of $105,000. 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?
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?
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other.
Explanation / Answer
ASSETS Amount LIABILITIES Amount Cash $ 50,000.00 Libilities $ 40,000.00 Land $ 180,000.00 Adam's Capital $ 114,000.00 Building $ 170,000.00 Baker's Capital $ 42,000.00 Carvil's Capital $ 80,000.00 Dobb's Capital $ 124,000.00 Total $ 400,000.00 Total $ 400,000.00 Ans 1 Working Cash Balance $ 50,000.00 Add:Cash received from Sale of Building $ 95,000.00 Available Cash $ 145,000.00 Less:Liabilities $ 40,000.00 Balance Cash $ 105,000.00 Note: Available cash may be distributed to partner's according to their Profit & Loss sharing ratio only when non partner's liabilities have been satisfied. Cash Distribution on profit sharing ratio of 1:3:3:3 Adam's Share $ 10,500.00 Baker's Share $ 31,500.00 Carvil's Share $ 31,500.00 Dobb'sShare $ 31,500.00 Total Cash $ 105,000.00 Ans 2 Adam's Capital Baker's Capital Carvil's Capital Dobb's Capital Capital Balance $ 114,000.00 $ 420,000.00 $ 80,000.00 $ 124,000.00 Profit Sahring Ratio 10% 30% 40% 20% Maximum Loss Each can Suffer $ 1,140,000.00 $ 1,400,000.00 $ 200,000.00 $ 620,000.00 Amt$ 2,00,000 distributed between Profit Sharing Ratio $ 20,000.00 $ 60,000.00 $ 80,000.00 $ 40,000.00 Land and building must be sold for $2,00,000 so Carvil will Receive its portion of $80,000
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