1) Shrek, Donkey, and Fiona are partners in SDF Corporation, and share profits and losses in the ratio of 5:3:2, respectively. The partnership has cash of $10,000 and noncash assets of $90,000 when they decide to liquidate. Liabilities at the time of liquidation are $40,000, including a note payable to Fiona of $5,000. The partner capital accounts are Shrek at $40,000, Donkey at $15,000 and Fiona at $5,000. The non-cash assets of the partnership were sold for $26,000. The liabilities, other than the note payable to Fiona, are paid. Fiona is personally insolvent. Shrek and Donkey are not insolvent.
Under the circumstances, which of the following is correct?
A. Shrek will receive a distribution in liquidation of $6,250.
B. Shrek will receive a distribution in liquidation of $8,000.
C. Donkey will be required to contribute $4,200 to the partnership.
D. Fiona will be required to contribute $2,800 to the partnership.
2) A, B, and C have capital balances of $80,000, $80,000, and $40,000, respectively. Profits are allocated 40% to A, 40% to B and 20% to C. The partners have decided to dissolve and liquidate the partnership. After paying all creditors, the amount available for distribution is $20,000. Both A and B are personally solvent. C is personally insolvent.
Under the circumstances, A and B will each __________________.
C. receive $8,000.
D. receive $9,000.
Answers to the two questions are given below and the fully worked ...
The advanced accounting partnerships and liquidations are examined.