The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation: Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. The partnership feels confident it will be able to eventually sell the noncash assets and wants to distribute some cash before paying liabilities. How much would each partner receive of a total $60,000 distribution of cash?

Question

The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation:  Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. The partnership feels confident it will be able to eventually sell the noncash assets and wants to distribute some cash before paying liabilities. How much would each partner receive of a total $60,000 distribution of cash?

Quizplus · Accepted Answer

Non-Cash Assets BV $210,000 - Assumed Cash Received $0 = Loss on Non-Cash Assets ($210,000) × 20% = Loss to Keaton ($42,000) - Capital Balance $90,000 = Keaton Tentative Distribution $48,000Non-Cash Assets BV $210,000 - Cash Received $0 = Loss on Non-Cash Assets ($210,000) × 40% = Loss to Lewis ($84,000) - Capital Balance $60,000 = Lewis' Deficit ($24,000) × 1/3 = Lewis' Deficit Portion to Keaton ($8,000)Keaton Tentative Distribution $48,000 + Lewis' Deficit Portion to Keaton ($8,000) = Keaton's Safe Distribution $40,000

The Keaton, Lewis, and Meador Partnership Had the Following Balance