Question

The partnership of Hanly, Ide, and Jen was dissolved. By August 1, 2006, all assets had been converted into cash and all partnership liabilities were paid. The partnership balance sheet on August 1, 2006 (with partner residual profit and loss sharing percentages) was as follows:

	Cash	$	50,000		Hanly, capital(30%)			$		4,000
					Ide, capital(20%)					(60,000)
					Jen, capital(50%)					106,000
	Total assets	$	50,000		Total equity			$		50,000
	The value of partners' personal assets and liabilities on August 1, 2006 were as follows:
					Hanly		Ide				Jen
	Personal assets			$	74,000	$	120,000		$		56,000
	Personal liabilities				72,000		80,000				60,000
Required:

Prepare the final statement of partnership liquidation.

2. Identify 3 advantages and 3 disadvantages of a partnership.

Answer 1

a)
	Hanly capital	Ide capital	Jen capital
Amount due	$                                              4,000	$                         -60,000	$                                           1,06,000
Cash brought in		$                           40,000
Ide defeciency to be shared by other 2 partners In 3:5	$                                             -7,500		$                                             -12,500
Amount due after Ide's defeciency	$                                             -3,500	$                                    -	$                                               93,500
Amount brought in	$                                              2,000
Hanly defeciency to be borne by Jen			$                                               -1,500
Net amount due	$                                                     -	$                                    -	$                                               92,000
Amount paid	$                                                     -	$                                    -	$                                               92,000
Ide defeciency to be shared by other 2 partners	Hanly	Ide
Personal assets	$                                            74,000	$                        1,20,000
Personal liabilities	$                                            72,000	$                           80,000
Amount that can be paid	$                                              2,000	$                           40,000
Capital	$                                             -3,500	$                         -60,000
Defeciency	$                                             -1,500	$                         -20,000
Cash amount available in business	$                                            50,000
Add: Cash brought in by
Hanly	$                                              2,000
Ide	$                                            40,000
Cash paid to Jen	$                                            92,000

b)

3 Advantages of partnership

1.) It is less formal & also has less legal obligations as compared to company

2.) It is easy to start

3.) Burden of work is hared among partners

3 Disadvantages of partnership

1.) Business has no independent legal status

2.) All partners have unlimited liability

3.) Conflicts & differences may arise between partners

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