Question

he following condensed balance sheet is for the partnership of Miller, Tyson, and Watson, who share profits and losses in the ratio of 6:2:2, respectively:

Cash	$	53,000			Liabilities	$	30,000
Other assets		153,000			Miller, capital		78,000
					Tyson, capital		78,000
					Watson, capital		20,000
Total assets	$	206,000			Total liabilities and capital	$	206,000

For how much money must the other assets be sold so that each partner receives some amount of cash in a liquidation?

Other assets must be sold

Answer 1

Answer:

Other Assets Must be sold for

$53,000

Working:

Miller capital = 78,000*10 /6 = $130,000

Tyson capital = 78,000 * 10 /2 = $390,000

Watson capital = 20,000 *10 /2 = $ 100,000

Since Watson capital is most vulnerable to a loss. a loss of $100,000 will completely eliminate Watson capital balance.

Thus if loss on disposal is less than $100,000 ,all partners will retain positive capital balance and receive some cash in liquidation.

Because of this, since other asset are of $153,000 ,they must be sold for any amount above$ 53,000 (153,000 -100,000) for all partners to get cash.