Question

On March 1, 2016, the ABC partnership decides to complete a lump-sum liquidation as soon as possible. The partners share profits and losses in the ratio of 2:5:3. Partner A and B is personally insolvent, but C have sufficient personal assets to satisfy any capital deficits. On March 5, 2016, the non-cash assets are sold for $120,000. Lump sum payments are made to the partners on March 16, immediately after the creditors have been paid. The partnership balance sheet prepared on March 1 appears below:

Cash	$ 10,000		Accounts Payable	$30,000
No Cash Assets	175,000		Due to Partner B	5,000
			A, Capital	10,000
			B, Capital	80,000
			C, Capital	60,000
Total Assets	$185,000		Total Liability and Capital	$185,000

Required:

Prepare a statement of partnership realization and liquidation, assume the partners’ loan is paid after outsider loan.

Answer 1

statement of partnership realization and liquidation:

Particulars	Amount in $
1) Cash available for distribution	10,000
2) Cash realized from the sale of non-cash asset	120,000
Total cash available	130,000
Amount paid to the account payable	-30,000
Amount paid to partner B	-5,000
The amount available for distribution to partners	95,000
Amount to be distributed to the partners in profit sharing ratio (2:5:3)
Partner A ( 95,000*2/10 )	19,000
Partner B (95,000*5/10 )	47,500
Partner C (95,000*3/10 )	28,500

Particulars	Partner A	Partner B	Partner C
Partners Capital Balance	10,000	80,000	60,000
Less: Cash distribution	19,000	47,500	28,500
Cash Surplus	9,000	-	-
Cash Deficit	-	-32,500	-31,500
Cash to be brought by A	9000	-	-
Remaining Cash to be brought by C [32,500-9,000= 23,500]	-	-	23,500