Question

Following is a series of independent cases. In each situation, indicate the cash distribution to be made to partners at the end of the liquidation process. Unless otherwise stated, assume that all solvent partners will reimburse the partnership for their deficit capital balances.

Part A

The Buarque, Monte, and Vinicius partnership reports the following accounts. Vinicius is personally insolvent and can contribute only an additional $23,000 to the partnership.

Cash	$	144,000
Liabilities		49,000
Monte, loan		48,000
Buarque, capital (50% of profits and losses)		22,000
Monte, capital (25%)		54,000
Vinicius, capital (25%)		(29,000	) (deficit)

Part B

Drawdy, Langston, and Pearl operate a local accounting firm as a partnership. After working together for several years, they have decided to liquidate the partnership’s property. The partners have prepared the following balance sheet:

Cash	$	34,000		Liabilities	$	45,000
Drawdy, loan		19,000		Langston, loan		24,000
Noncash assets		178,000		Drawdy, capital (40%)		79,000
				Langston, capital (30%)		64,000
				Pearl, capital (30%)		19,000
Total assets	$	231,000		Total liabilities and capital	$	231,000

The firm sells the noncash assets for $134,000; it will use $29,000 of this amount to pay liquidation expenses. All three of these partners are personally insolvent.

Part C

Drawdy, Langston, and Pearl operate a local accounting firm as a partnership. After working together for several years, they have decided to liquidate the partnership’s property. The partners have prepared the following balance sheet:

Cash	$	34,000		Liabilities	$	45,000
Drawdy, loan		19,000		Langston, loan		24,000
Noncash assets		178,000		Drawdy, capital		79,000
				Langston, capital		64,000
				Pearl, capital		19,000
Total assets	$	231,000		Total liabilities and capital	$	231,000

The firm sells the noncash assets for $134,000; it will use $20,000 of this amount to pay liquidation expenses. All three of these partners are personally insolvent. Assume that the profits and losses are split 2:4:4 to Drawdy, Langston, and Pearl, respectively.

Part D

Following the liquidation of all noncash assets, the partnership of Krups, Lindau, Riedel, and Schnee has the following account balances. Krups is personally insolvent.

Liabilities	$	9,000
Krups, loan		20,000
Krups, capital (30% of profits and losses)		(48,000	) deficit
Lindau, capital (30%)		(44,000	) deficit
Riedel capital (20%)		29,000
Schnee, capital (20%)		34,000

Answer 1

a) Particulars			B's capital	Monte loan & capital	v's capital
balance at the beginning			22000	102000	-29000
v's contribution					23000
elimination of v's deficit(50:25)			-4000	-2000	6000
final distribution			18000	100000	0
B)			Drawdy loan& capital	Langston loan & Capital	pearl capital
balance at the beginning			60000	88000	19000
less:loss on disposal, 44000*(40:30:30)			17600	13200	13200
less: liquidation exp (40:30:30)			11600	8700	8700
capital balances			30800	66100	-2900
Pearl deficit 2900*(40:30)			1657	1243	2900
final distribution			29143	64857	0
C)			Drawdy loan& capital	Langston loan & Capital	pearl capital
balance at the beginning			60000	88000	19000
loss on disposal (178000-134000)*2:4:4			-8800	-17600	-17600
liquidation exp 20000*2:4:4			-4000	-8000	-8000
capital balance			47200	62400	-6600
pearls deficit 6600*2:4			-2200	-4400	6600
Final distribution			45000	58000	0
D)			krup's loan & capital	lindau capital	riedel capital	schnee capital
beginning balance			-28000	-44000	29000	34000
krups deficit 28000*3:2:2			28000	-12000	-8000	8000
capital balances			0	-56000	21000	42000
Lindau's contribution				56000
Final distribution			0	0	21000	42000