4. In 2028, S.T. Enterprises is being liquidated. It currently holds cash of $23

Question

4. In 2028, S.T. Enterprises is being liquidated. It currently holds cash of $23,000 and liabilities amounts to $34,000. The capital balances are:

Kirk (40% of profits and losses)         23,000

Sisko (30%)                                        18,000

Picard (20%)                                       (30,000) deficit

Janeway (10%)                                    (22,000) deficit

Picard is insolvent (has not money). Janeway contributes enough to bring her capital balance to zero.

Show the liquidation distributions.

Explanation / Answer

Notes:

1. The deficit in Picard's capital account is borne by Kirk and Sisko in their profit sharing ratio of 4 : 3.

2. The remaining cash of $11,000 is distributed to the solvent partners in their capital ratios.

Partners Cash Liabilities Kirk Sisko Picard Janeway Balances 23000 34000 23000 18000 -30000 -22000 Receipt of deficiency 22000 22000 Balances 45000 34000 23000 18000 -30000 0 Payment of liabilities -34000 -34000 Balances 11000 0 23000 18000 -30000 0 Picard's loss distribution (4:3) 0 0 -17143 -12857 30000 0 Remaining cash 11000 0 5857 5143 0 0 Cash distribution to partners -11000 -5857 -5143 0 0 Final balances 0 0 0 0 0

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