Question

The Drysdale, Koufax, and Marichal partnership has the following balance sheet immediately prior to liquidation:

Cash	$	44,000	Liabilities	$	44,500
Noncash assets		244,000	Drysdale, loan		27,500
			Drysdale, capital (50%)		82,000
			Koufax, capital (30%)		72,000
			Marichal, capital (20%)		62,000

a. Liquidation expenses are estimated to be $23,000. Prepare a predistribution schedule to guide the distribution of cash.

b. Assume that assets costing $82,000 are sold for $64,000. How is the available cash to be divided?

Answer 1

Loss to be allocated = 82000 - $64000 = $18000

Partner	Capital balance	Loss Allocation ratio	Maximum loss that can be absorbed
Schedule 1
Drysdale	$82,000	50%	$9,000.00
Koufax	$72,000	30%	$5,400.00
Marichal	$62,000	20%	$3,600.00

a.)

Liquidation expenses to be allocated $23,000
Partner	Capital balance	Liquidation expense Allocation ratio	Allocation of Liquidation expenses
Schedule 2
Drysdale	$82,000	50%	$11,500
Koufax	$72,000	30%	$6,900
Marichal	$62,000	20%	$4,600

b.)

DRYSLADE, KOUFAX, AND MARICHAL
Distribution of Available Cash
Available Cash		Distribution of Cash
Cash balance	$44,000	Liabilities	$44,500
Sale of assets	$226,000	Liquidation Expenses	$23,000
		Drysdale, loan	$27,500
		Distribution among partners
		- Drysdale Capital	$61,500
		- Koufax Capital	$59,700
		- Marichal Capital	$53,800
Total	$270,000	Total	$270,000
	Drysdale	Koufax	Marichal
Reported balances	$82,000	$72,000	$62,000
Assumed Loss	$9,000	$5,400	$3,600
Schedule 1
Adjusted balances	$73,000	$66,600	$58,400
Assumed Loss	$11,500	$6,900	$4,600
Schedule 2
Adjusted balances	$61,500	$59,700	$53,800