The BDX partnership has decided to liquidate. At the time, the profit and loss r

Question

The BDX partnership has decided to liquidate. At the time, the profit and loss ratios for Baker Donnelly and Xavier were 1:1:3. The balance sheet is below. S 60,000 Liabilities 340,000 B Capital D, Capital X, Capital 40,000 100,000 140,000 Cash Other assets Using the loss absorption potential system, determine how the partners will share in the distribution of cash A. Loss Absorption Potential Capital P & L ratio Loss Absorption Potential Order of cash distribution Loss Absorption Potential Asset Distribution P & L ratio Loss Absorption Potential Net capital interest Distribution to D Subtotal Distribution to B& Subtotal B. Prepare an advance plan for the distribution of cash, Advance Cash Distribution Plan Order of cash distribution Liabilities B 1. First $40,000 2. Next $40,000 3. Next $120,000 4. Remainder

Explanation / Answer

A.

B.

Capital 1 1.4 1.2 P&L Ratio 1 1 3 Loss Absorbtion Potential 1 1.4 1.2 Should be in the ration of Capital Order of cash distribution 3 1 2

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