Liquidating Partnerships—Deficiency Prior to liquidating their partnership, Unde
ID: 2335212 • Letter: L
Question
Liquidating Partnerships—Deficiency
Prior to liquidating their partnership, Underwood and Morrison had capital accounts of $17,000 and $71,000, respectively. The partnership assets were sold for $36,000. The partnership had no liabilities. Underwood and Morrison share income and losses equally.
Required:
a. Determine the amount of Underwood's deficiency.
$
b. Determine the amount distributed to Morrison, assuming Underwood is unable to satisfy the deficiency.
$
Liquidating Partnerships
Prior to liquidating their partnership, Perkins and Montgomery had capital accounts of $34,000 and $52,000, 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 $102,000. The partnership had $3,000 of liabilities. Perkins and Montgomery share income and losses equally.
Determine the amount received by Perkins as a final distribution from liquidation of the partnership.
$
Sharpe has a capital balance of $48,000 after adjusting assets to fair market value. Marler contributes $27,000 to receive a 30% interest in a new partnership with Sharpe.
Determine the amount and recipient of the partner bonus.
Amount of bonus $ Recipient of bonusExplanation / Answer
1.
a.
Underwood's equity prior to liquidation = 17000
Sale of asset = 36000
Book value of assets = 17000+71000 = 88000
Loss on liquidation = 88000 - 36000 = 52000
Underwood's share of loss = 26000
Therefore deficiency = 26000 - 17000 = 9000
b.
amount distributed to Morrison = 71000 - 26000 - 9000
= 36000
2.
Amount left to distrbuted = 102000 - 3000 = 99000
Liabilities are to be paid off first prior to liquidation.
Profit on liquidation = 99000-34000-52000 = 13000
Profit of each partner = 6500
Amount to be given to Perkins = 34000 + 6500 = 40500
3.
Total Equity = 27000 + 48000 = 75000
Marler's share = 75000 * 30% = 22500
Therefore Bonus = 27000 - 22500 = 4500
Recepient = Sharpe
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