In: Accounting
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? | |||||||
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 |