Question

A partnership is currently holding $400,000 in assets and $234,000 in liabilities. the partnership is to be liquidated, and $20,000 is the best estimation of the expenses that will be incurred during this process. the four partners share profits and losses as shown. capital balances at the start of the liquidation follow: lo 15-7

berzina, capital (40%) . . . . . . . . . . . . . . . . . . . . . . . . . $59,000
horvath, capital (30%) . . . . . . . . . . . . . . . . . . . . . . . . . 39,000
markov, capital (10%) . . . . . . . . . . . . . . . . . . . . . . . . . 34,000
petronis, capital (20%) . . . . . . . . . . . . . . . . . . . . . . . . 34,000

prepare a predistribution plan to determine which partner will be the first to receive cash from the liquidation and what amount that partner will receive before other partners receive any cash.
Multiple Choice
a. $12.250
b. $17,000
c. $14750
d. $19,500

Answer 1

The partnership liquidation involves selling assets, paying liabilities, and incurring expenses, with the remainder distributed to partners. The partnership with $400,000 in assets, $234,000 in liabilities, and $20,000 in estimated liquidation expenses has $146,000 available for distribution.

Step-by-step explanation:

When a partnership is liquidated, its assets are sold, liabilities are paid off, and the remaining money is distributed among the partners according to their capital accounts and profit-sharing ratios. In this scenario, we are given that the partnership has $400,000 in assets and $234,000 in liabilities. Additionally, we expect $20,000 in liquidation expenses. Subtracting liabilities and expenses from assets, the net amount available for distribution to partners is calculated as follows: $400,000 (assets) - $234,000 (liabilities) - $20,000 (expenses) = $146,000.

If the partners' capital balances are provided, we would then allocate this $146,000 according to these balances and the profit-sharing agreement between the partners. However, as the partners' specific profit-sharing ratios are not provided in the information given, we cannot distribute this sum further without more detail.