The partnership of Frick, Wilson, and Clarke has elected to cease all operations

Question

The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate its business property. A balance sheet drawn up at this time shows the following account balances: Cash $ 63,000 Liabilities $ 37,000 Noncash assets 255,000 Frick, capital (60%) 153,000 Wilson, capital (20%) 41,000 Clarke, capital (20%) 87,000 Total assets $ 318,000 Total liabilities and capital $ 318,000 Part A Prepare a predistribution plan for this partnership Part B The following transactions occur in liquidating this business: Distributed cash based on safe capital balances immediately to the partners. Liquidation expenses of $7,000 are estimated as a basis for this computation. Sold noncash assets with a book value of $106,000 for $63,000. Paid all liabilities. Distributed cash based on safe capital balances again. Sold remaining noncash assets for $57,000. Paid actual liquidation expenses of $5,000 only. Distributed remaining cash to the partners and closed the financial records of the business permanently.

Explanation / Answer

Part A Part B A predistribution plan for this partnership Assets Realisation and Distribution Plan Assets Liabilities and Equity Realisation Cash $63,000 Liabilities   $37,000 Cash balance $63,000 Non Cash assets $255,000 Capital balances Sale of non cash assets $63,000 - Frick $153,000 Sale of remaining non cash assets $57,000 - Wilson $41,000 Total Realisation $183,000 - Clarke $87,000 Distribution Total Assets $318,000 Total Liabilities and Equity $318,000 Cash distribution among partners $63,000 Cash distribution among partners $26,000 Payment of all liabilities $37,000 Payment of liquidation expenses $5,000 Final distribution of cash among partners $52,000 Total Distribution $183,000 Distribution among Partners Frick Wilson Clarke Predistribution Capital balances $153,000 $41,000 $87,000 Less : $63000 Cash distributed based on safe capital balances (54%:15%:31%) $34,302 $9,192 $19,505 Less : $43000 Loss on sale of non cash assets distributed (60%:20%:20%) $25,800 $8,600 $8,600 Less: $26000 Cash distributed based on safe capital balances (54%:15%:31%) $14,157 $3,794 $8,050 Less : $92000 Loss on sale of non cash assets distributed (60%:20%:20%) $55,200 $18,400 $18,400 Less : Distribution of Liquidation expense $5000 (60%:20%:20%) $3,000 $1,000 $1,000 Capital balances before closure of business $20,541 $14 $31,445 Final distribution of remaining cash balance $20,541 $14 $31,445

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