Question

The partnership of W, X, Y, and Z has the following balance sheet:

Cash	$ 42,000	Liabilities	$ 67,000
Other assets	281,000	W, capital (50% of profits and losses)	72,000
		X, capital (30%)	90,000
		Y, capital (10%)	52,000
		Z, capital (10%)	42,000

       Z is personally insolvent, and one of his creditors is considering suing the partnership for the $17,000 that is currently due. The creditor realizes that liquidation could result from this litigation and does not wish to force such an extreme action unless the creditor is reasonably sure of getting the money that is due. If the partnership sells the other assets, how much money must it receive to ensure that $17,000 would be available from Z’s portion of the business? Liquidation expenses are expected to be $27,000. (Do not round intermediate calculations.)

Solution: Minimum Amount =

Answer 1

Answer-

In a partnership firm, the profit or loss of the assets has been divided between the partners in the proportion of capital balance invested by the partners or profit or loss sharing ratio in the above case Z has insolvent and if the partnership sells all the other assets he will get money in the proportion of capital balance.

Formula=	Other Assets Value x Capital invested by partners
	Total Capital

		281000	27000
Partners Capital		Other Assets	Liquidation Expense	Money Received by partners (Other Assets-Liquidation exp)
W	72000	79031	8335	70696
X	90000	98789	10419	88370
Y	52000	57078	6020	51058
Z	42000	46102	4862	41240
Total Capital	256000	281000	308441	338562

So Z will receive $ 41240 After the sale of Other Assets.