In: Accounting
The Keller, Long, and Mason partnership had the following balance sheet just before entering liquidation:
Cash | $ | 115,000 | Liabilities | $ | 45,000 | |
Noncash assets | 230,000 | Keller, Capital | 100,000 | |||
Long, Capital | 70,000 | |||||
Mason, Capital | 130,000 | |||||
Total | $ | 345,000 | Total | $ | 345,000 |
Keller, Long, and Mason share profits and losses in a ratio of 2:4:4. Assuming noncash assets were sold for $70,000 and liquidation expenses in the amount of $18,500 were incurred, how much will each partner receive in the liquidation?
Keller | Long | Mason | |||||||
A) | $ | 14,000 | $ | 28,000 | $ | 28,000 | |||
B) | $ | 37,000 | $ | 74,000 | $ | 74,000 | |||
C) | $ | 63,833 | $ | 0 | $ | 57,667 | |||
D) | $ | 0 | $ | 0 | $ | 121,500 | |||
E) | $ | 57,833 | $ | 12,000 | $ | 51,667 |
Cash | Noncash Assets | Liabilities | Keller (2/10) | Long (4/10) | Mason (4/10) | |
Balances before realization | 115000 | 230000 | 45000 | 100000 | 70000 | 130000 |
Sale of assets net of liquidation expenses and division of loss | 51500 | -230000 | 0 | -35700 | -71400 | -71400 |
Balances after realization | 166500 | 0 | 45000 | 64300 | -1400 | 58600 |
Payment of liabilities | -45000 | 0 | -45000 | 0 | 0 | 0 |
Balances after payment of liabilities | 121500 | 0 | 0 | 64300 | -1400 | 58600 |
Division of Long's deficiency | 0 | 0 | 0 | -467 | 1400 | -933 |
Balances | 121500 | 0 | 0 | 63833 | 0 | 57667 |
Cash distributed to partners | -121500 | 0 | 0 | -63833 | 0 | -57667 |
Option C $ 63,833, $0, $57,667 is correct |