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Allen Lie, Beverely Cheat and Hugo Steal have been partners in the very successful law firm...

Allen Lie, Beverely Cheat and Hugo Steal have been partners in the very successful law firm of
Lie, Cheat and Steal for many years, however; they have decided to end their law practice
The balance sheet of Lie Cheat and Steal on January 2nd 2017 when they decided to end their law practice is as follows:
Steal is a 50% partner; Lie is a 30% partner and Cheat is a 20% partner.
Balance Sheet
Lie, Cheat and Steal
January 2nd 2017
Cash $20,000.00
Accounts receivable $80,000.00
Building (net) $300,000.00
Land $500,000.00
Accounts payable $400,000.00
A. Lie capital $10,000.00
B. Cheat $100,000.00
H. Steal $390,000.00
Question 1: On January 2nd How much (if any) can each partner take as a safe payment?
On January 22nd, the law firm sold all of their receivables to The Shark Law Firm for $50,000.
Question 2:   Assuming no one took any safe payments on January 2nd; how much can each partner take as a safe payment on January 23rd?
On February 2nd Ground Hog Day; the law firm sold the land to The Squirrel Company for $505,000.
Question 3: Assuming no one previously took any safe payments, how much can each partner take as a safe payment on February 3rd?
On February 14th Valentines day, the law firm sold the building to Cupid Company for $ 222,000 and paid off the accounts payable.  
Question 4:   Assuming no one previously took any safe payments, and any partner with a negative balance in their capital cannot cover their shortage
how much does each partner get in the final partner distribution?
Question 5: Assuming no one previously took any safe payments, and any partner with a negative balance in their capital CAN cover the shortage
how much does each partner contribute or receive in the final partner distribution?

Solutions

Expert Solution

Answers:-
Q-1
Funds Available for Partners:-
Particulars Amount
Cash 20000
Accounts Receivale 50000
Buidling NET 300000
Land 500000
Toatl of Assets (A) 870000
Less:-
Liabilities: Accounts Payable (B) 400000
Net Funds Available for Partners (A-B) 470000
Calculation of Safe Payments
Partners Capital Amount
Lie 10000
Cheat 100000
Steal 390000
Total of Capital 500000
As funds available is Less than capital Partners will be paid Proportaion of Capital Ratio
Partners- ANS Safe Payment Amount
Lie 9400
Cheat 94000
Steal 366600
Safe Payments to Partners 470000
Q-2
Funds Available for Partners:-
Particulars Amount
Cash 20000
Accounts Receivale 80000
Buidling NET 300000
Land 505000
Toatl of Assets (A) 905000
Less:-
Liabilities: Accounts Payable (B) 400000
Net Funds Available for Partners (A-B) 505000
As funds available is More than capital Partners will be paid 1st Capital Actual Amount and Balance in Profit Ratio
Partners- ANS Capital Amount Balance in Profit Ratio Safe Payment Amount
Lie-20% 10000 1000 11000
Cheat-30% 100000 1500 101500
Steal- 50% 390000 2500 392500
Total 500000 5000 505000
Q-3
Funds Available for Partners:-
Particulars Amount
Cash 20000
Accounts Receivale 80000
Buidling NET 222000
Land 505000
Toatl of Assets (A) 827000
Less:-
Liabilities: Accounts Payable (B) 400000
Net Funds Available for Partners (A-B) 427000
As funds available is Less than capital Partners will be paid Proportaion of Capital Ratio
Partners- ANS Safe Payment Amount
Lie 8540
Cheat 85400
Steal 333060
Safe Payments to Partners 427000
Q-4
Funds Available for Partners:-
Particulars Amount
Cash 20000
Accounts Receivale 80000
Buidling NET 300000
Land 500000
Toatl of Assets (A) 900000
Less:-
Liabilities: Accounts Payable (B) 400000
Net Funds Available for Partners (A-B) 500000
As funds available equal to capital Partners will be paid Proportaion of Capital Ratio
Partners- ANS Safe Payment Amount
Lie-20% 10000
Cheat-30% 100000
Steal- 50% 390000
Total 500000
Q-5
Funds Available for Partners:-
Particulars Amount
Cash 20000
Accounts Receivale 80000
Buidling NET 300000
Land 500000
Toatl of Assets (A) 900000
Less:-
Liabilities: Accounts Payable (B) 400000
Net Funds Available for Partners (A-B) 500000
As funds available equal to capital Partners will be paid Proportaion of Capital Ratio
Partners- ANS Safe Payment Amount
Lie-20% 10000
Cheat-30% 100000
Steal- 50% 390000
Total 500000

ekkarill92 answered 2 years ago
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