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Exam 16: Partnerships: Liquidation

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Question 41

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Tom, Dick, and Harry are partners in an equipment leasing business that has not been able to generate the type of revenue expected by the partners. They share profits and losses in a ratio of 5:3:2. They have decided to liquidate the business and have sold all the assets except for one piece of heavy machinery. All partnership liabilities have been settled and all the partners are personally insolvent. The machinery has a book value of $85,000, and the partners have capital account balances as follows: Each of the following are independent cases. -Refer to the information given above.What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for 21,100 dollars?

A) Option A
B) Option B
C) Option C
D) Option D

E) A) and B)
F) A) and C)

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Question 42

Multiple Choice

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The JKL partnership liquidated its business in 20X9.Due to an expected long liquidation period,a cash distribution plan was developed.The initial sale and realization of cash from noncash assets resulted in partner K properly getting $24,000.No other partners received cash along with K.Based upon this information,which of the following statements is correct? I.K's loss absorption power (LAP) was higher than J's LAP and L's LAP. II.K's capital balance was substantially larger than the balances of J and L.

A) I only
B) II only
C) Either I or II
D) Neither I nor II

E) A) and C)
F) C) and D)

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Question 43

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Siera, Lani, and Cecilia are partners in an equipment leasing business that has not been able to generate the type of revenue expected by the partners. They share profits and losses in a ratio of 5:3:2, respectively. They have decided to liquidate the business and have sold all the assets except for one piece of heavy machinery. All the partners are personally insolvent. The machinery has a book value of $120,000, and the partners have capital balances as follows: Each of the following is an independent case. -Refer to the information given above.What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for $44,000?

Partners Dennis and Lilly have decided to liquidate their business. The following information is available: Dennis and Lilly share profits and losses in a 3:2 ratio. During the first month of liquidation, half the inventory is sold for $60,000, and $60,000 of the accounts payable is paid. During the second month, the rest of the inventory is sold for $45,000, and the remaining accounts payable are paid. Cash is distributed at the end of each month, and the liquidation is completed at the end of the second month. -Refer to the information provided above.Using a safe payments schedule,how much cash will be distributed to Lilly at the end of the second month?

When a partnership is liquidated on a piecemeal basis and cash has been distributed properly to all partners as noncash assets have been turned into cash,all future cash distributions should be made: I.In the profit and loss ratio. II.According to the balances in the partners' capital accounts.

Partners Dennis and Lilly have decided to liquidate their business. The following information is available: Dennis and Lilly share profits and losses in a 3:2 ratio. During the first month of liquidation, half the inventory is sold for $60,000, and $60,000 of the accounts payable is paid. During the second month, the rest of the inventory is sold for $45,000, and the remaining accounts payable are paid. Cash is distributed at the end of each month, and the liquidation is completed at the end of the second month. -Refer to the information provided above.Using a safe payments schedule,how much cash will be distributed to Dennis at the end of the second month?

Partners David and Goliath have decided to liquidate their business. The following information is available: David and Goliath share profits and losses in a 3:1 ratio, respectively. During the first month of liquidation, half the inventory is sold for $70,000, and $50,000 of the accounts payable are paid. During the second month, the rest of the inventory is sold for $55,000, and the remaining accounts payable are paid. Cash is distributed at the end of each month, and the liquidation is completed at the end of the second month. -Refer to the information provided above.Assume instead that the remaining inventory was sold for $20,000 in the second month.What payments will be made to David and Goliath at the end of the second month?