Question & Answer: The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:…..

The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:
cash        90000 liabilities 60000

Noncash assets 300000 Henry capital 80000

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Isaac capital 110000

Jacobs capital 140000

Total 390000                       Total 390000

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 asets were then sold for $120,000 and 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.)

Expert Answer

 

Given facts:
1. The non cash assests worth 300,000 was sold for 120,000
Loss = 300000 – 120000
180000
2. This loss of 180000 will be divided in the ratio 2:4:4 between Henry, Isaac and Jacobs as per the given information
3. The ratio for distributing safe cash is computed with respect to each partner’s capital amount
ratio 8:11:14 between Henry, Isaac and Jacobs
4. Safe Cash calculation
Cash 90000 – current liabilities 60000
30000
5. The liquidation expenses of 5000 will also be shared in 2:4:4 ratio
6. Cash from Sale 120000 – liquidation expenses 5000 = 115000 will be distributed to partners
ratio 8:11:14 between Henry, Isaac and Jacobs
Particulars Henry Isaac Jacobs
Capital 80000 110000 140000
Distribution of Safe Cash in the ratio 8:11:14 7273 10000 12727
Remaining Capital 72727 100000 127273
Sharing of loss 180000 in the given ratio of 2:4:4 36000 72000 72000
Remaining Capital 36727 28000 55273
Sharing of liquidation expenses 5000 in 2:4:4 ratio 1000 2000 2000
Remaining Capital 35727 26000 53273
Distributiion of 115,000 in ratio of 8:11:14 27879 38333 48788
Complete distribution of 120,000 (sale of non cash assets)
Particulars Henry Isaac Jacobs
Sharing of liquidation expenses 5000 in 2:4:4 ratio 1000 2000 2000
Distributiion of 115,000 in ratio of 8:11:14 27879 38333 48788
Grand Total 28879 40333 50788

working

Particulars Henry Isaac Jacobs
Capital 80000 110000 140000
Distribution of Safe Cash in the ratio 8:11:14 =(30000*(8/33)) =(30000*(11/33)) =(30000*(14/33))
Remaining Capital =+B15-B17 =+C15-C17 =+D15-D17
Sharing of loss 180000 in the given ratio of 2:4:4 =(180000*(2/10)) =(180000*(4/10)) =(180000*(4/10))
Remaining Capital =+B19-B21 =+C19-C21 =+D19-D21
Sharing of liquidation expenses 5000 in 2:4:4 ratio =(5000*(2/10)) =(5000*(4/10)) =(5000*(4/10))
Remaining Capital =+B23-B25 =+C23-C25 =+D23-D25
Distributiion of 115,000 in ratio of 8:11:14 =(115000*(8/33)) =(115000*(11/33)) =(115000*(14/33))
Complete distribution of 120,000 (sale of non cash assets)
Particulars Henry Isaac Jacobs
Sharing of liquidation expenses 5000 in 2:4:4 ratio =(5000*(2/10)) =(5000*(4/10)) =(5000*(4/10))
Distributiion of 115,000 in ratio of 8:11:14 =(115000*(8/33)) =(115000*(11/33)) =(115000*(14/33))
Grand Total =+B4+B6 =+C4+C6 =+D4+D6

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