Liquidating Partnerships Prior to liquidating their partnership, Perkins and Eri

Question

Liquidating Partnerships

Prior to liquidating their partnership, Perkins and Ericson had capital accounts of $22,000 and $40,000, respectively. Prior to liquidation, the partnership had no cash assets other than what was realized from the sale of assets. These partnership assets were sold for $54,000. The partnership had $2,000 of liabilities. Perkins and Ericson share income and losses equally.

Determine the amount received by Perkins as a final distribution from liquidation of the partnership.

Explanation / Answer

Perkins equity prior to liquidation $22,000 Sale of assets $54,000 Carrying value of assets ($22,000 + $40,000 + $2,000) $64,000 Loss on liquidation $10,000 Perkins share of loss (50% * $10,000) ($5,000) Perkins cash distribution $17,000

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