Question 18 In its predistribution plan, what is the amount of cash allocated to

Question

Question 18

In its predistribution plan, what is the amount of cash allocated to Norris and Rodgers in step 3?

$35,570

$44,250

$35,650

$43,520

$35,570

$44,250

$35,650

$43,520

The partnership of Wingler, Norris Rodgers, and Guthrie was formed several years ago as a architectural firm. Several partnersrecently had personal financdal problem s and deded to terminate operations and liquidate the business. The following balance sheet summarizec its financial information on January 5 at the beginning of this process: Cash Accounts Receivable InventorY Land Building and Equipment inet Total Assets $17,000 80,000 100,000 57,000 193,000 447,000 Liabilities Rodgers Loan Wingler, Capital Norris, Capital Rodgers Capital Gu thrie, Capital Total Liabilities and Capital $79,000 25,000 141,000 100,000 62,000 40.000 47,000 The estimated liquidation expenses were Profit and loss allocation ratio according to the provisions of par tnership agreement: 18,000 Norris Rodgers Guthrie 20% 10% 30% The following transactions occurred during the liquidation: Jan. 14 Collected 70% of the total accounts receivalbe with the rest judged to be uncollectible Feb. 23 Sold the land, building and equipment for Mar. 1 Made safe capital distributions Mar.29 Learned that Guthrie became personally in solvent Apr, 3 Pa liabilitie s Jun. 30 Sold all inventory for 70% 180,000 55,000 ul 1 Made safe capital distributions again Sep, 26 Paid liquidation expenses Nov, 4 Made final cash distrubtions to the partners based on the assumption that all partners except Guthrie are personally solvent. 15,000

Explanation / Answer

Hi,

Now, we will calculate estimated losses the firm has to bear:

Now, since we have completed the above steps, we will find safe capital distribution:

Look at the following table for the same :

Also Note that Allocation of Guthries Loss will be as per New Profit sharing ratio between the remaining partners.

Please let me know if you have any other queries in from the solution. Happy to answer!! All the best :)

In the present question, we have four partners in the partnership firm , namely: Name Profit Sharing Ratio 1 Wingler 40% 2 Norris 20% 3 Rogers 10% 4 Guthrie 30%

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