The Keller, Long, and Mason partnership had the following balance sheet just before entering liquidation: Keller, Long, and Mason share profits and losses in a ratio of 2:4:4.Assuming noncash assets were sold for $70,000 and liquidation expenses in the amount of $18,500 were incurred, how much will each partner receive in the liquidation?

Question

The Keller, Long, and Mason partnership had the following balance sheet just before entering liquidation:

Keller, Long, and Mason share profits and losses in a ratio of 2:4:4.Assuming noncash assets were sold for $70,000 and liquidation expenses in the amount of $18,500 were incurred, how much will each partner receive in the liquidation?

Quizplus · Accepted Answer

First, we need to calculate the total assets available for distribution:

Cash: $14,500 
Accounts Receivable: $45,500 
Inventory: $12,000 
Non-Cash Assets: $70,000

Total Assets: $142,000

Now, we need to subtract the liabilities and liquidation expenses from this amount:

Notes Payable: $28,000 
Accounts Payable: $30,500 
Accrued Expenses: $9,000 
Liquidation Expenses: $18,500

Total Liabilities and Expenses: $86,000

Total Assets - Total Liabilities and Expenses = $56,000

This $56,000 will be distributed among the partners according to their profit-sharing ratio:

Partner 1 (2/10 of the ratio) = 2/10 x $56,000 = $11,200 
Partner 2 (4/10 of the ratio) = 4/10 x $56,000 = $22,400 
Partner 3 (4/10 of the ratio) = 4/10 x $56,000 = $22,400

Therefore, each partner will receive the following amounts:

Partner 1: $11,200 
Partner 2: $22,400 
Partner 3: $22,400

Option C is the correct answer.

The Keller, Long, and Mason Partnership Had the Following Balance