Liquidation schedule—positive capital accounts The ABC partnership reports the f

Question

Liquidation schedule—positive capital accounts
The ABC partnership reports the following condensed balance sheet:

The partners wish to liquidate the partnership. The noncash assets are sold for $500,000 with the loss distributed to the partners in the ratio of 30%/30%/40% to partner A, B, and C, respectively. The liabilities are paid in full. Prepare a schedule detailing the liquidation of the assets, repayment of the liabilities, and distribution of the remaining cash to the partners

Fill in for the spaces that say "Answer":

Cash $325,000 Liabilities $400,000 Noncash assets 637,500 Partner A, capital 225,000 Partner B, capital 225,000 Partner C, capital 112,500 Total assets $962,500 Total liabilities and partner capital $962,500

Explanation / Answer

Profit Sharing Ratio = 30:30:40 Non-cash -----Capital Accounts----- Cash Assets Liabilities A B C Liquidation Schedule of ABC Partnership: Capital account, prior to liquidation        3,25,000        6,37,500        4,00,000       2,25,000       2,25,000       1,12,500 Sale of noncash assets        5,00,000       -6,37,500        8,25,000                 -          4,00,000       2,25,000       2,25,000       1,12,500 Payment of creditors       -4,00,000       -4,00,000        4,25,000                 -                    -         2,25,000       2,25,000       1,12,500 Distribution to partners       -4,25,000       1,27,500       1,27,500       1,70,000 Post-liquidation balances                 -                   -                    -         3,52,500       3,52,500       2,82,500

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