Question

Gonda, Herron, and Morse is considering possible liquidation because partner Morse is personally insolvent. The partners have the following capital 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? Please show the work.

A. $0.

B. $27,500.

C. $45,000.

D. $47,500.

E. $50,000.

Answer 1

B. $27,500.

Step-by-step explanation:

The computation of the minimum amount Morse receive is shown below:

= Morse capital balance - claim amount filed × his share

= $40,000 - $50,000 × 25%

= $40,000 - $12,500

= $27,500

Simply we deduct his share of claim amount form the liabilities amount so that the correct amount can come

All other information which is given is not relevant. Hence, ignored it