The Drysdale, Koufax, and Marichal partnership has the following balance sheet i

Question

The Drysdale, Koufax, and Marichal partnership has the following balance sheet immediately prior to liquidation:

Cash $ 47,000 Liabilities $ 44,000
Noncash assets 259,000 Drysdale, loan 32,500
Drysdale, capital (50%) 86,500
Koufax, capital (30%) 76,500
Marichal, capital (20%) 66,500

Liquidation expenses are estimated to be $26,000. Prepare a predistribution schedule to guide the distribution of cash.
Assume that assets costing $85,000 are sold for $65,500. How is the available cash to be divided?

Explanation / Answer

1. Asset costing $85000 sold for $65500, incurring loss of $19500. This amount should be distributed to the partners in the income sharing ratio.

Loss ---- 19500

Dr. Drysdale, capital (50%) - 9750

Dr. Koufax, capital (30%) - 5850

Dr. Marichal, capital (20%) - 3950

Remaing balances --

Drysdale, capital - 76750

Koufax, capital - 70650

Marichal, capital - 62550

Total Capital --- 209950

Capital Sharing Ratio ---

Drysdale - 36.56%

Koufax - 33.65%

Marichal - 29.79%

Remaining cash after all distributions will be distributed as per the capital sharing ratio

2. Assuming all remaining assets sold as per book value, i.e 174000 ( 259000 - 85000)

3.

Distribution schedule Total Available Cash :- $ Cash 47000 Cash by selling assets of B.V. $85000 65500 Cash by selling remaing assets 174000 Total 286500 Less : Outside Liabilities 44000 Less : Drysdale's loan 32500 Balance 209500 Less : Liquidation expense 26000 Balance 183500 Drysdale (36.56%) 67088 Koufax (33.65%) 61748 Marichal (29.79%) 54664 Remaining cash will be distributed as per the capital sharing ratio.

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