Question

The Eaton, Kraft and Thornton partnership began the process of liquidation with the following balance sheet:...

The Eaton, Kraft and Thornton partnership began the process of liquidation with the following balance sheet:
cash 20,000 liabilities 200,000

noncash assets 430,000 eaton capital, 50,000

kraft, capital 80,000

thorton, capital 120,000

total 450,000 450,000

Eaton, Kraft and Thornton share profits and losses in a ratio of 2:3:5. Non-cash assets are sold for $200,000. Liquidation expenses are expected to be $12,000. Prepare a schedule using the format provided below to show the liquidation of the partnership and final distribution to all partners. Assume none of the Partners are able to contribute additional resources to the Partnership and the other partners must absorb any partner deficit balance if necessary.

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Answer #1
Schedule of liquidation of partnership
cash non cash asset Liabilities Eaton capital Kraft capital Thorton capital
Balance 20000 430000 200000 50000 80000 120000
sale of non cash asset and distribution of loss to partners 430000-200000=230000 in 2:3:5 200000 (430000) (46000) [230000*2/10] (69000)   [230000*3/10] (115000)   [230000*5/10]
payment of liabilities (200000) (200000)
payment of liquidation expense (12000) (2400)   [12000*2/10] (3600)    [12000*3/10] (6000)    [12000*5/10]
cash available for distribution 8000 0 0 1600 7400 (1000)

share of deficiency of thorton's capital 2:3

 (400)    [1000*2/5] (600)     [1000*3/5] 1000
Distribution of cash to other partners (8000) 0 0 1200 6800 0
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