The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances: Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. Before liquidating any assets, the partners determined the amount of cash for safe payments and distributed it. The noncash assets were then sold for $120,000. The liquidation expenses of $5,000 were paid. How much of the $120,000 would be distributed to the partners? (Hint: Either a predistribution plan or a schedule of safe payments would be appropriate for solving this item.)

Question

The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:  Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. Before liquidating any assets, the partners determined the amount of cash for safe payments and distributed it. The noncash assets were then sold for $120,000. The liquidation expenses of $5,000 were paid. How much of the $120,000 would be distributed to the partners? (Hint: Either a predistribution plan or a schedule of safe payments would be appropriate for solving this item.)

Quizplus · Accepted Answer

To find out the distribution of the $120,000, we need to follow the following steps:

Step 1: Determine the total assets available for distribution
Cash safe payments = $3,000 (2/10 x $15,000)
Noncash assets sold for = $120,000 
Total assets available for distribution = $123,000

Step 2: Deduct total liabilities, including liquidation expenses 
Total liabilities = $5,000 
Total assets available after settling liabilities = $118,000

Step 3: Distribute to partners based on their sharing ratio 
Total sharing ratio = 2+4+4 = 10 
Henry's share = (2/10) x $118,000 = $23,600 
Isaac's share = (4/10) x $118,000 = $47,200 
Jacob's share = (4/10) x $118,000 = $47,200

Therefore, the correct choice is B.

The Henry, Isaac, and Jacobs Partnership Was About to Enter