The partnership of Gordon, Handel, and Mitchell is considering possible liquidation because partner Mitchell is personally insolvent. The partners have the following capital account balances: $120,000, $140,000, and $80,000, respectively, and share profits and losses 35%, 45%, and 20%, respectively. The partnership has $400,000 in noncash assets that can be sold for $300,000. The partnership has $20,000 cash on hand, and $80,000 in liabilities. What is the minimum that partner Mitchell's creditors would receive if they have filed a claim for $100,000?

Question

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After selling the noncash assets for $300,000 and adding the $20,000 cash on hand, the partnership has $320,000. After paying off the $80,000 liabilities, $240,000 remains. The capital balances after the loss on asset sale are $85,000 for Gordon, $95,000 for Handel, and $60,000 for Mitchell. Mitchell's creditors can claim the $60,000 from his capital balance.

The Partnership of Gordon, Handel, and Mitchell Is Considering Possible