Cash distribution in partnership liquidation
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Chapter 10
PROBLEM ONE
The Keaton, Lewis, and Meador partnership had the following balance sheet just before
entering liquidation:
CASH 10000 LIABILITIES 130000
NON CASH ASSETS 300000 KEATON CAPITAL 60000
LEWIS CAPITAL 40000
MEADOR CAPITAL 80000
TOTALS 310000 TOTALS 310000
Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were
sold for $180,000. Liquidation expenses were $12,000.
PART A:
Assume that Lewis was personally insolvent and could not contribute any assets to the
partnership, while Keaton and Meador were both solvent. What amount of cash would
Keaton and Meador have received from the distribution of partnership assets?
PART B:
Assume that Keaton was personally insolvent with assets of $8,000 and liabilities of $60,000.
Lewis and Keaton were both solvent and able to cover deficits in their capital accounts, if any.
What amount of cash could Keaton's personal creditors have expected to receive
from partnership assets?
PROBLEM TWO (EASY)
The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following
account balances:
CASH 90000 LIABILITIES 60000
NON CASH ASSETS 300000 80000
110000
140000
TOTALS 390000 TOTALS 390000
Estimated expenses of liquidation were $10,000. Henry, Isaac, and Jacobs shared
profits and losses in a ratio of 2:4:4.
What amount of safe cash was available, based on the above information?
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