The partnership of Anderson, Berry, Hammond, and Winwood is being liquidated. It

Question

The partnership of Anderson, Berry, Hammond, and Winwood is being liquidated. It currently holds cash of $22,000 but no other assets. Liabilities amount to $32,800. The capital balances are

a. If both Hammond and Winwood are personally insolvent, how much money must Berry contribute to this partnership?

b-1. If only Winwood is personally insolvent, how much money must Hammond contribute?

b-2. If only Winwood is personally insolvent, how will Hammond's contribution (funds) be disbursed?

c. If only Hammond is personally insolvent, how much money should Anderson receive from the liquidation?

Anderson (30% of profits and losses) $ 26,200 Berry (30%) 29,000 Hammond (20%) (24,000 ) (deficit) Winwood (20%) (42,000 ) (deficit)

Explanation / Answer

a. If both Hammond and Winwood are personally insolvent, how much money must Berry contribute to this partnership :-

Liability = 32800
Less : cash = 22000

Cash required = 10800

Berry need to contribute the amount as per the capital contributing ratio, which is :-

52.5

b-1. If only Winwood is personally insolvent, how much money must Hammond contribute:-

Hammond must contribute to the deficit of his capital account = $ 24000

b-2. If only Winwood is personally insolvent, how will Hammond's contribution (funds) be disbursed :-

Cash required to disburse the excess liability (calculated above) = 10800
Less :- Amount contributed by hammond = 24000

Remaining balance required to be disburse = 13200

Disbursement of remaining fund:-

c. If only Hammond is personally insolvent, how much money should Anderson receive from the liquidation :-

Winwood contribution to the deficit of his capital account = 42000

Less : Excess liability over cash available = 10800

Remaining balance require to be disbursed = 31200

Disbursement of the remaining amount :-

So, Anderson will get = $14820

particular Anderson Berry Total Capital in $ 26200 29000 55200 Ratio 47.5

52.5

100 Amount required to be contributed in capital contributing ratio 5130 5670 10800

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