The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the

Question

The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances: Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. Before liquidating any assets, the partners determined the amount of cash for safe payments and distributed it. The noncash assets were then sold for $120,000. The liquidation expenses of $5,000 were paid. How would the $120,000 be distributed to the partners? (Hint: Either a predistribution plan or a schedule of safe payments would be appropriate for solving this item.)

Answer: Henry: 28000 Isaac: 36000 Jacob: 56000

How can we get the answer? I only have hint below, while I have no idea about why? could you please explain? (The hint: Cash from Sale $120,000 - Liquidation Expenses $5,000 = Cash to Distribute $115,000 × 20% = $23,000 + Henry's Portion of Deficit Balance at Safe Distribution $5,000 = Henry's Distribution of $28,000)

Explanation / Answer

The total amount of cash available for safe payments would be $25,000 (90,000 - 60,000 - 5,000). This amount will be distributed between Henry and Jacobs in the ratio of 6:4 meaning that $15,000 (25,000*60%) will be given to Henry and $10,000 (25,000*40%) will be given to Jacobs.

The value of $120,000 will be distributed to the partners as follows:

Henry Issac Jacobs Equity 80,000 110,000 140,000 Less Loss on Assets (300,000 - 120,000) 36,000 (180,000*2/10) 72,000 (180,000*4/10) 72,000 (180,000*4/10) Liquidation Expenses 1,000 (5,000*2/10) 2,000 (5,000*4/10) 2,000 (5,000*4/10) Balances 43,000 36,000 66,000 Less Distribution of Safe Payments to Partners 15,000 0 10,000 Net Balances $28,000 $36,000 $56,000

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