The following account balances were available for the Perry, Quincy, and Renquist partnership just before it entered liquidation: Included in Perry's capital balance is a $20,000 partnership loan owed to Perry. Perry, Quincy, and Renquist shared profits and losses in a ratio of 2:4:4. Liquidation expenses were expected to be $15,000. All partners were solvent.
What would be the minimum amount for which the noncash assets must have been sold, in order for Quincy to receive some cash from the liquidation?

Question

The following account balances were available for the Perry, Quincy, and Renquist partnership just before it entered liquidation:  Included in Perry's capital balance is a $20,000 partnership loan owed to Perry. Perry, Quincy, and Renquist shared profits and losses in a ratio of 2:4:4. Liquidation expenses were expected to be $15,000. All partners were solvent.
What would be the minimum amount for which the noncash assets must have been sold, in order for Quincy to receive some cash from the liquidation?

Quizplus · Accepted Answer

First, we need to determine the total value of the nonloan assets:

$200,000 (Perry's capital balance) + $320,000 (total capital balance for all partners, including Perry's loan) - $20,000 (Perry's loan) = $500,000

Next, we need to divide the total value of the nonloan assets by the profit and loss ratio of each partner:

Perry: 2/10 x $500,000 = $100,000
Quincy: 4/10 x $500,000 = $200,000
Renquist: 4/10 x $500,000 = $200,000

Since Quincy is entitled to some cash from the liquidation, we know that the value of Quincy's share of the nonloan assets must be greater than the liquidation expenses ($15,000). Therefore, the minimum amount for which the noncash assets must have been sold is:

$200,000 (Quincy's share of nonloan assets) - $15,000 (liquidation expenses) = $185,000

Thus, the answer is B, any amount in excess of $190,000.

The Following Account Balances Were Available for the Perry, Quincy