Question

ABC Corporation currently has $20,000 in cash, $30,000 in noncash assets, and liabilities of $35,000. The partners, Adrian, Batch, and Crenshaw, had capital balances of $5,000, $8,000, and $2,000, respectively. The partners share a profit and loss ratio of 1:1:3. The noncash assets were sold for $60,000. Complete the liquidation chart below.

1. Statement of Partnership Liquidation
   	Cash	Noncash Assets	Liabilities	Capital
   				Adrian	Batch	Crenshaw
   Balances before realization	Blank 1	Blank 2	Blank 3	Blank 4	Blank 5	Blank 6
   Sale of assets and division of loss or gain	Blank 7	Blank 8	Blank 9	Blank 10	Blank 11	Blank 12
   Balances after realization	Blank 13	Blank 14	Blank 15	Blank 16	Blank 17	Blank 18
   Payment of liabilities	Blank 19	Blank 20	Blank 21	Blank 22	Blank 23	Blank 24
   Balances after payment of liabilities	Blank 25	Blank 26	Blank 27	Blank 28	Blank 29	Blank 30
   Cash distributed to partners	Blank 31	Blank 32	Blank 33	Blank 34	Blank 35	Blank 36
   Final balances	Blank 37	Blank 38	Blank 39	Blank 40	Blank 41	Blank 42

Answer 1

Statement of Partnership Liquidation
	Cash	Noncash Assets	Liabilities	Capital
				Adrian	Batch	Crenshaw
Balances before realization	20,000	30,000	35,000	5,000	8,000	2,000
Sale of assets and division of loss or gain	60,000	-30,000	0	6,000	6,000	18,000
Balances after realization	80,000	0	35,000	11,000	14,000	20,000
Payment of liabilities	-35,000	0	-35,000	0	0	0
Balances after payment of liabilities	45,000	0	0	11,000	14,000	20,000
Cash distributed to partners	-45,000	0	0	-11,000	-14,000	-20,000
Final balances	0	0	0	0	0	0

Gain on sale of non cash assets = Sale price - Book value

= 60,000-30,000

= $30,000

Gain to Adrian = 30,000 x 1/5

= $6,000

Gain to Batch = 30,000 x 1/5

= $6,000

Gain to Crenshaw = 30,000 x 3/5

= $18,000