A local partnership was considering the possibility of liquidation since one of the partners (Ding) was personally insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively. Creditors of partner Ding filed a $25,000 claim against the partnership's assets. At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time.
If the assets could be sold, for $228,000 what is the minimum amount that Tillman's creditors would have received?

Question

A local partnership was considering the possibility of liquidation since one of the partners (Ding) was personally insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.  Creditors of partner Ding filed a $25,000 claim against the partnership's assets. At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time.
If the assets could be sold, for $228,000 what is the minimum amount that Tillman's creditors would have received?

Quizplus · Accepted Answer

Non-Cash Assets BV $360,000 - Cash Received $228,000 = Loss on Non-Cash Assets ($132,000) × 20% = Loss to Tillman ($26,400) - Capital Balance $96,000 = Tillman Excess after Loss $69,600Non-Cash Assets BV $360,000 - Cash Received $228,000 = Loss on Non-Cash Assets ($132,000) × 20% = Loss to Ezzard ($26,400) - Capital Balance $17,000 = Ezzard's Deficit ($9,400) × 2/8 = Deficit to Tillman's Capital Account ($2,350)Tillman Excess after Loss $69,600 + Ezzard's Deficit to Laurel's Capital Account ($2,350) = Tillman's Available Balance to Creditors $67,250

A Local Partnership Was Considering the Possibility of Liquidation Since