Gonda, Herron, and Morse is considering possible liquidation because partner Morse is personally insolvent.The partners have the following capital account balances: $60,000, $70,000, and $40,000, respectively, and share profits and losses 30%, 45%, and 25%, respectively.The partnership has $200,000 in noncash assets that can be sold for $150,000.The partnership has $10,000 cash on hand, and $40,000 in liabilities.What is the minimum that partner Morse's creditors would receive if they have filed a claim for $50,000?

Question

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Partner Morse's capital account balance is $40,000. The partnership has $150,000 in noncash assets that can be sold for $150,000 and $10,000 cash on hand. The partnership has $40,000 in liabilities. Therefore, the partnership has $120,000 in assets available to distribute to creditors. Partner Morse's creditors would receive a minimum of $27,500 (40,000/120,000 * 50,000).

Gonda, Herron, and Morse Is Considering Possible Liquidation Because Partner