Question

The partnership of Winn, Xie, Yang, and Zed has the following balance sheet:

Cash	$	39,000	Liabilities	$	51,000
Other assets		256,000	Winn, capital (50% of profits and losses)		69,000
			Xie, capital (30%)		87,000
			Yang, capital (10%)		49,000
			Zed, capital (10%)		39,000

Zed is personally insolvent, and one of his creditors is considering suing the partnership for the $14,000 that is currently owed. The creditor realizes that this litigation could result in partnership liquidation and does not wish to force such an extreme action unless Zed is reasonably sure of obtaining at least $14,000 from the liquidation.

Determine the amount for which the partnership must sell the other assets to ensure that Zed receives $14,000 from the liquidation? Liquidation expenses are expected to be $24,000. (Do not round intermediate calculations.)

	Minimum amount

Answer 1

Total funds needed to pay the liabilities is $51,000 +$24000						$ 75,000.00
Cash is $39000 therefore, net fund required to clear liability is 75000-39000						$ 36,000.00
Based on pre distribution plan $10000 is solely receiavble by Y
Then next, (75000-39000-10000)		26000	is distributable among Y and Z in the ratio 1:1
The cash generated at this stage for Z $25200 would provide for payment of personal creditors.
Thus to pay creditors of Z , the other assets must be sold for (25200+14000+39000)						$ 78,200.00
Pre distribution plan :
It is the plan of dividing the money among its owners when the liquidation of company happens :
			w	x	y	z
Beginning capital			69000	87000	49000	39000
Assumed loss of 138000 (schedule 1) (5:3:1:1)			69000	-41400	-13800	-13800
Balances			0	45600	35200	25200
Assumed loss of 76000 (schedule 2) (0:3:1:1)			0	-45600	-15200	-15200
Balances			0	0	20000	10000
Assumed loss of 50000(Schedule 3) (0:0:1:1)			0	0	-10000	-10000
Balances			0	0	10000	0
Schedule 1 :
Partner	Capital balance/loss	Maximum loss to be absorbed
W	69000/50%	138000	Most vulnerable.
X	87000/30%	290000
Y	49000/10%	490000
Z	39000/10%	390000
Schedule 2:
Partner	Capital balance/loss	Maximum loss to be absorbed
X	45600/(3/5)	76000	Most vulnerable.
Y	35200/(1/5)	176000
Z	25200/(1/5)	126000
Schedule 3:
Partner	Capital balance/loss	Maximum loss to be absorbed
Y	20000/(1/2)	40000
Z	10000/(1/2)	20000	Most vulnerable.