Question

Hardin, Sutton, and Williams 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, Williams has undergone personal financial problems, and is insolvent. To satisfy Williams' creditors, the partnership has decided to liquidate.

The following balance sheet has been produced:

Cash	$	10,000		Liabilities	$	80,000
Noncash assets		227,000		Hardin, capital		96,000
				Sutton, capital		45,000
				Williams, capital		16,000
Total assets	$	237,000		Total liabilities and capital	$	237,000
During the liquidation process, the following transactions take place:
- Noncash assets are sold for $116,000.
- Liquidation expenses of $12,000 are paid. No further expenses are expected.
- Safe capital distributions are made to the partners.
- Payment is made of all business liabilities.
- Any deficit capital account balances are deemed to be uncollectible.
Develop a predistribution plan for this partnership, assuming $12,000 of liquidation expenses are expected to be paid.

Answer 1