Adams, Peters, and Blake share profits and losses for their APB Partnership in a ratio of...

Adams, Peters, and Blake share profits and losses for their APB Partnership in a ratio of 2:3:5. When they decide to liquidate, the balance sheet is as follows: Assets Liabilities and Equities Cash $ 44,000 Liabilities $ 48,000 Adams, Loan 10,800 Adams, Capital 59,400 Other Assets 208,000 Peters, Capital 81,000 Blake, Capital 74,400 Total Assets $ 262,800 Total Liabilities & Equities $ 262,800 Liquidation expenses are expected to be negligible. No interest accrues on loans with partners after termination of the business. Required: Prepare a cash distribution plan for the APB Partnership. Please follow the practical guidelines when completing this worksheet.

Expert Solution

APSB PastnerShip
Cash Distribution Plan
Particular	Loss Absorption potential			Capital Account
	Adans	Peter	Blake	Adans	Peter	Blake
P/L Percentage				20%	30%	50%
PreliquadationCapitall Balance				$59,400	$81,000	$74,400
Loans to Adans				-$10,800
Total				$48,600	$81,000	$74,400
Loss Absorption Potential	$297,000	$270,000	$148,800
Decrease LAP (297000-270000)	$27,000	$0		$5,400	$0	$0
	$270,000	$270,000	$148,800	$43,200	$81,000	$74,400
Decrease LAP	$121,200	$121,200	$0	$24,240	$40,560	$0
Balance	$148,800	$148,800	$148,800	$18,960	$40,440	$74,400

Computation of Loss Apsorption potential
Particular	Adans	Peter	Blake
Loss Absorption Potential	27000
	(297000-270000)
Reduce Proportionately in Capital Account	5400
	(2700*20%
Loss Absorption Capital	121200
	(270000-148800)
Reduce Propotionately in Capital Account	24240	36360

Computation of Loss Apsorption potential
Particular	Adans	Peter	Blake
Capital	59400	81000	74400
Loss Sharing Ratio	20%	30%	50%
Loss Absorption potential=Capital/Loss Sharing Ratio	297000	270000	148800

ekkarill92 answered 1 year ago

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