The partnership of Winn, Xie, Yang, and Zed has the following balance sheet: Zed

Question

The partnership of Winn, Xie, Yang, and Zed has the following balance sheet:

Zed is personally insolvent, and one of his creditors is considering suing the partnership for the $19,000 that is currently owed. The creditor realizes that this litigation could result in partnership liquidation and does not wish to force such an extreme action unless Zed is reasonably sure of obtaining at least $19,000 from the liquidation.

Determine the amount for which the partnership must sell the other assets to ensure that Zed receives $19,000 from the liquidation? Liquidation expenses are expected to be $29,000. (Do not round intermediate calculations.)

Minimum Amount: ?

Cash $ 44,000 Liabilities $ 53,000 Other assets 283,000 Winn, capital (50% of profits and losses) 74,000 Xie, capital (30%) 102,000 Yang, capital (10%) 54,000 Zed, capital (10%) 44,000

Explanation / Answer

the money available after liquidation should be $249000 by settling the capitals of partners including zed required $19000. i.e. (74000 + 102000 + 54000 + 19000)

then doing reverse calculation i.e. from bottom to top approach

cash - $44000

other assets (balance)- $258000 (this is the minimum money should be realised out of selling assets)

less:-

liabilities ($53000)

net:- $249000

capital:-

winn $74000

xiee $102000

yang $ 54000

zed $19000

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