Liquidation schedule—one negative capital account with no capital contribution T
ID: 2484104 • Letter: L
Question
Liquidation schedule—one negative capital account with no capital contribution
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. Assume that any partners with a negative balance in their respective Capital Accounts are insolvent and, therefore, do not make any capital contribution to the partnership (i.e., remaining partners must absorb the negative Capital Account according to their profit sharing formula). Prepare a schedule detailing the liquidation of the assets, repayment of the liabilities, and distribution of the remaining cash to the partners.
Fill in the spaces that say "Answer":
Cash $252,500 Liabilities $400,000 Noncash assets 637,500 Partner A, capital 225,000 Partner B, capital 225,000 Partner C, capital 40,000 Total assets $890,000 Total liabilities and partner capital $890,000Explanation / Answer
Non cash
Capital account
Cash
Assets
Liabilities
A
B
C
Capital account prier to liquidation
252500
637500
400000
225000
225000
40000
Sales of non cash assets
500000
-500000
allocation od deficit (30%/30%/40%)
-137500
-41250
-41250
-55000
Payment of creditors
-400000
-400000
Distribution to partners
-352500
-183750
-183750
15000
Negative balance of partner C (50%/50%)
7500
7500
Post liquidation balance
0
0
0
7500
7500
0
Non cash
Capital account
Cash
Assets
Liabilities
A
B
C
Capital account prier to liquidation
252500
637500
400000
225000
225000
40000
Sales of non cash assets
500000
-500000
allocation od deficit (30%/30%/40%)
-137500
-41250
-41250
-55000
Payment of creditors
-400000
-400000
Distribution to partners
-352500
-183750
-183750
15000
Negative balance of partner C (50%/50%)
7500
7500
Post liquidation balance
0
0
0
7500
7500
0
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