Solution P16-6
Jones, Smith, and Tandy Partnership
Statement of Partnership Liquidation
for the liquidation period January 1, 2003 to March 31, 2003
Balances
Cash
Noncash
Assets
Accounts
Payable
20%
Jones
Capital
30%
Smith
Capital
50%
Tandy
Capital
$ 15,000
$215,000
$80,000
$40,000
$60,000
$50,000
January 2003
Inventories sold
Receivables collections
20,000
14,000
Predistribution balance
49,000
65,000*
14,000*
136,000
9,000*
80,000
13,500*
22,500*
31,000
46,500
27,500
31,000
46,500
27,500
Cash distribution to
creditors
Balances January 31
February 2003
Land sold
Land and buildings sold
Receivables collections
Balances February 28
40,000*
9,000
60,000
40,000
3,000
112,000
40,000*
136,000
40,000
40,000*
70,000*
6,000*
20,000
4,000
6,000*
600*
40,000
28,400
6,000
9,000*
900*
42,600
10,000
15,000*
1,500*
21,000
March 2003
Write-off of furniture
and fixtures
Predistribution balance
20,000*
112,000
4,000*
40,000
6,000*
10,000*
24,400
36,600
11,000
24,400*
36,600*
11,000*
Cash distribution:
Creditors
Partners
Balances March 31
40,000*
72,000*
0
40,000*
0
Solution P16-7
1
Cash distribution plan for Link, Mack, and Nell partnership
Vulnerability ranks
Capital
Balances
Link
Mack
Nell
$40,000
20,000
20,000
$80,000
+
-
Loan
Balances
Equity in
Partnership
Profit
and Loss
Ratio
Loss
Absorption
Potential
Vulnerability
Ranking
$15,000
8,000
$55,000
12,000
20,000
50%
30
20
$110,000
40,000
100,000
3
1
2
$ 7,000
$87,000
Schedule of assumed loss absorption
Link
Predistribution equities
Assumed loss to absorb Mack's
equity 50/30/20
Assumed loss to absorb Nell's
equity 50/20
Mack
Nell
Total
$55,000
$12,000
$20,000
$87,000
20,000
12,000
8,000
40,000
35,000
12,000
47,000
30,000
12,000
42,000
$ 5,000
$ 5,000
Cash distribution plan
Priority
Creditors
First $55,000
Link
Mack
Nell
100%
Next $5,000
100%
Next $42,000
5/7
Remainder
50%
2/7
30%
20%
Solution P16-7
2
(continued)
Cash of $25,000 is realized from inventories and receivables with a
$45,000 book value
Cash balance December 31, 2008
$47,000
Realized during 2009
25,000
72,000
Less:
Amount reserved for contingencies
(10,000)
Cash available for distribution
$62,000
Link, Mack, and Nell Partnership
Schedule of January 2009 Cash Distribution
Cash
Available
Cash to be distributed
$62,000
Payments to creditors
(55,000)
Remainder
To Link (for loan balance)
Remainder
To Link (5/7) and
Nell (2/7)
Cash distribution
Priority
Creditors
Link
Mack
Nell
$55,000
Total
$55,000
7,000
(5,000)
$5,000
5,000
2,000
(2,000)
0
1,429
$55,000
$6,429
571
2,000
571
$62,000
Solution P16-8
Jason, Kelly, and Becky Partnership
Statement of Partnership Liquidation
for the period January 1, 2003 through February 28, 2003
Noncash
Assets
Cash
Balances January 1
$ 16,500
Offset loan to Jason
Collection of receivables
Liquidation expenses
Predistribution balances
Priority
Liabilities
$163,500
$21,000
Becky
Loan
50%
Jason
Capital
30%
Kelly
Capital
20%
Becky
Capital
$9,500
$69,000
$47,000
$33,500
14,000*
25,000
14,000*
28,000*
1,500*
2,000*
39,500
1,000*
121,500
21,000
900*
600*
600*
400*
9,500
52,500
45,500
32,500
9,500*
0
52,500
1,100*
44,400
2,900*
29,600
1,500*
900*
600*
1,000*
600*
400*
6,750*
4,050*
2,700*
Cash distribution:
Creditors
Partners-Schedule A
Balances January 31
21,000*
13,500*
5,000
21,000*
121,500
Liability discovered
Liquidation expenses
3,000
2,000*
Sale of remaining
assets
Predistribution balances
108,000
111,000
121,500*
0
3,000
43,250
38,850
25,900
38,850*
25,900*
Cash distribution:
Creditors
Partners-Schedule B
Balances February 28
3,000
3,000*
108,000*
$43,250
Schedule A
Possible
Losses
Partners' equity January 31
Allocate possible losses
$126,500
Allocate Jason's deficit
Safe payments to partners January 31
50%
Jason
Equity
30%
Kelly
Equity
20%
Becky
Equity
$52,500
(63,250)
(10,750)
10,750
0
$45,500
(37,950)
7,550
(6,450)
$ 1,100
$42,000
(25,300)
16,700
(4,300)
$12,400
$43,250
$43,250
$38,850
$38,850
$25,900
$25,900
Schedule B
Partners' equity February 28
Safe payments to partners February 28
Solution P16-98
Roger, Susan, and Tom Partnership
Statement of Partnership Liquidation
for the period January 1, 2003 through February 28, 2003
Balances January 1
Cash
Noncash
Assets
Priority
Liabilities
$ 20,000
$140,000
$40,100
Offset loan to Susan
Roger
Loan
30%
Roger
Capital
30%
Susan
Capital
40%
Tom
Capital
$5,000
$ 9,900
$45,000
$60,000
10,000*
Sale of assets
40,000
40,000*
Predistribution balances
60,000
90,000
10,000*
40,100
5,000
9,900
35,000
60,000
5,000
9,900
2,814*
32,186
17,086*
42,914
20,700*
20,700*
27,600*
11,486
15,314
Cash distribution:
Creditors
Partners-Schedule A
Balances January 31
40,100*
19,900*
0
40,100*
90,000
21,000
90,000*
Sale of remaining
assets
Offset loan to
Roger capital
Predistribution balances
5,000*
21,000
5,000
5,800*
Cash distribution:
Partners-Schedule B
Balances February 28
21,000*
9,000*
$ 5,800*
$ 2,486
12,000*
$ 3,314
Note: Roger owes Susan $2,486 and Tom $3,314. These balances remain on the partnership books
until it is determined if Roger is personally solvent and able to pay $5,800 to the other
partners.
Schedule A
Possible
Losses
Partners' equity January 1
Allocate possible losses
$90,000
Allocate Roger's deficit
Safe payments to partners January 31
30%
Roger
Equity
30%
Susan
Equity
40%
Tom
Equity
$14,900
(27,000)
(12,100)
12,100
0
$35,000
(27,000)
8,000
(5,186)
$ 2,814
$60,000
(36,000)
24,000
(6,914)
$17,086
$(5,800)
5,800
0
$11,486
(2,486)
$ 9,000
$15,314
(3,314)
$12,000
Schedule B
Partners' equity February 28
Allocate Roger's deficit
Safe payments to partners February 28
Note: Since cash was distributed to Susan and Tom in January and since Roger
has negative equity, the distribution in February is necessarily in the 3/7
and 4/7 relative profit and loss sharing ratio of Susan and Tom.