Question

The balance sheet for the Delphine, Xavier, and Olivier partnership follows: Cash $ 69,360 Liabilities $...

The balance sheet for the Delphine, Xavier, and Olivier partnership follows:

Cash $ 69,360 Liabilities $ 46,500
Noncash assets 126,000 Delphine, capital 58,680
Xavier, capital 53,000
Olivier, capital 37,180
Total assets $ 195,360 Total liabilities and capital $ 195,360


Delphine, Xavier, and Olivier share profits and losses in the ratio of 3:4:3, respectively. The partners have agreed to terminate the business and estimate that $14,600 in liquidation expenses will be incurred.

What is the amount of cash that safely can be paid to partners prior to liquidation of noncash assets?

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Cash that safely can be distributed

Which partner should receive the cash distribution from (a)?

Which partner should receive the cash distribution from (a)?

Delphineradio
Xavierradio
Olivierradio

Homework Answers

Answer #1
Accounting for the liquidation of a partnership involves four steps as follows:

1. Sell non cash assets for cash.

In the question there is no information about for how much amount the non-cash assets have been sold. Hence it has been assumed that the non-cash assets have been sold to the value shown in the balance sheet. i.e. $126,000 less the liquidation expenases of $14,600
$126,000
Less -$14,600
$111,400
2. Allocate any gain or loss on the sale of non cash assets to each partner using the profit sharing ratio.
Hence, $114,400 has to be allocated to partners in profit sharing ratio Ratio Share Calculation
Delphine 3 $33,420 $111,400/10*3
Xavier 4 $44,560 $111,400/10*4
Olivier 3 $33,420 $111,400/10*3
10 $111,400
3. Pay any liabilities of the partnership.
With the Cash $69,360
Pay Laibilities -$46,500
4. Distribute the remaining cash to the partners using the capital ratio. $22,860 (A)
Partners Captial(B) Ratio ( C) Amount D = A*C Calculation
Delphine $58,680 39% $9,011 ($58,680/$148,860)*100 = 39%
Xavier $53,000 36% $8,139 ($53,000/$148,860)*100 = 36%
Olivier $37,180 25% $5,710 ($37,180/$148,860)*100 = 25%
$148,860 $22,860
Cash to be received by the Partners
Partners Share in Non-Cash Assets Proceeds Share in Balance Cash Total
A B C =A+B
Delphine $33,420 $9,011 $42,431
Xavier $44,560 $8,139 $52,699
Olivier $33,420 $5,710 $39,130
$111,400 $22,860 $22,860
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