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?


 Cash that safely can be distributed

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

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

 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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