Question

The partnership of Anderson, Berry, Hammond, and Winwood is being liquidated. It currently holds cash of $21,200 but no other assets. Liabilities amount to $32,500. The capital balances are

Anderson (40% of profits and losses) $ 38,700

Berry (30%) 27,000

Hammond (10%) (36,000 ) (deficit)

Winwood (20%) (41,000 ) (deficit)

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?

Answer 1

Answer -

A)

Amount- Debit/(credit)

Particular	cash	liability	anderson	Berry	hammond	winwood
Opening balance	21200	-32500	-38700	-27000	36000	41000
Payment of liabilities	-21200	21200
Balance	0	-11300	-38700	-27000	36000	41000
Hammond and winwood allocation(4:3)	0	0	44000	33000	-36000	-41000
Balance	0	-11300	5300	6000	0	0

Berry has to contribute $6000

B-1)

Paticular	cash	liability	anderson	berry	hammond	winwood
Opening balance	21200	-32500	-38700	-27000	36000	41000
Payment of liabilities	-21200	21200
Balance	0	-11300	-38700	-27000	36000	41000
Winwood allocation(4:3:1)	0	0	20500	15375	5125	-41000
Balance	0	-11300	-18200	-11625	41125	0

Hammond contribution = $41125

B-2)

Out of the hammond contribution of $41125 the amount disbursed to:

1) creditore = $11300

2) anderson = $18200

3) berry = $11625

C)

Particular	cash	liability	anderson	berry	Hammond	winwood
Op. Balance	21200	-32500	-38700	-27000	36000	41000
Payment of liabilities	-21200	21200
Balance	0	-11300	-38700	-27000	36000	41000
Hammond allocation(4:3:2)	0	0	16000	12000	-36000	8000
Balance	0	-11300	-22700	-15000	0	49000

Anderson will receive $22700 from liquidation.