Question

A partnership is considering possible liquidation because one of the partners (Bell) is personally insolvent. Profits and losses are divided on a 4:3:2:1 basis, respectively. Capital balances at the current time are

Bell, capital	$	55,000
Hardy, capital		58,000
Dennard, capital		15,000
Suddath, capital		82,000

Bell’s creditors have filed a $23,000 claim against the partnership’s assets. The partnership currently holds assets of $320,000 and liabilities of $110,000. If the assets can be sold for $200,000, what is the minimum amount that Bell’s creditors would receive?

Answer 1

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Loss on sale of assets	=	($320000 - $200000)
	=	$ 1,20,000
	Bell	Hardy	Dennard	Suddath
Capital Balance	$   55,000	$     58,000	$   15,000	$    82,000
Loss on sale of assets (4:3:2:1)	$ -48,000	$   -36,000	$ -24,000	$ -12,000
Balance	$     7,000	$     22,000	$    -9,000	$    70,000
Deficit of Dennard (4:3:1)	$   -4,500	$     -3,375	$      9,000	$    -1,125
Minimum Balance distributed	$     2,500	$     18,625	$             -	$    68,875
Minimum amount that Bell creditors would receive is $2500