Question

H, S, and W have operated a local business as a partnership for several years. All profits and losses have been allocated in a 3:2:1 ratio, respectively. Recently, W has undergone personal financial problems, and is insolvent. To satisfy Ws' creditors, the partnership has decided to liquidate. Current capital balances are H $96,000, S $45,000, W $16,000. There are no liabilities, but anticipated liquidation expense of $10,000. How would the first $89,000 of available cash be distributed to Q1 H, Q2 S, and Q3 W? Prepare a pre-distribution plan to aid in your calculations.

Answer 1

PROFIT SHARING RATIO
H:S:W               = 3:2:1
Given, Partnership is Liquidated
And
Capital Balance
	H	96000
	S	45000
	W	16000
Liquidation expenses			10000
Pre Distribution Schedule
Surplus Cash				89000
First utilise for liquidation expenses				10000
balance				79000
to be distributed to partners
in profit sharing ratio
	H	79000*3/6		39500	ANSWER
	S	79000*2/6		26333.33333
	W	79000*1/6		13166.66667