Question

The following condensed balance sheet is for the partnership of Miller, Tyson, and Watson, who share profits and losses in the ratio of 6:2:2, respectively:

Cash	$	57,000			Liabilities	$	27,000
Other assets		157,000			Miller, capital		84,000
					Tyson, capital		84,000
					Watson, capital		19,000
Total assets	$	214,000			Total liabilities and capital	$	214,000

For how much money must the other assets be sold so that each partner receives some amount of cash in a liquidation?

Other assets must be sold: for an amount over...

Answer 1

Ans:

Miller capital = 84,000*10 /6 = 140,000

Tyson capital = 84,000 * 10 /2 = 420,000

Watson capital = 19,000 *10 /2 = $ 95,000

since Watson capital is most vulnerable to a loss. a loss of 95,000 will completely eliminate Watson capital balance.

Thus if loss on disposal is less than $95,000 ,all partners will retain positive capital balance and receive some cash in liquidation.

Because of this, since other asset are of $157,000 ,they must be sold for any amount above$ 62,000 (157,000 -95,000) for all partners to get cash.