Question

The partnership of Larson, Norris, Spencer, and Harrison has decided to terminate operations and liquidate all business property. During this process, the partners expect to incur $8,000 in liquidation expenses. All partners are currently solvent. The balance sheet reported by this partnership at the time that the liquidation commenced follows. The percentages indicate the allocation of profits and losses to each of the four partners.

Cash $ 28,250 Liabilities $ 47,000
Accounts receivable 44,000 Larson, capital (20%) 15,000
Inventory 39,000 Norris, capital (30%) 60,000
Land and buildings 23,000 Spencer, capital (20%) 75,000
Equipment 104,000 Harrison, capital (30%) 41,250
Total assets $238,250 Total liabilities and capital $238,250

Required:
Based on the information provided, prepare a predistribution plan for liquidating this partnership.

Answer 1

LARSON, NORRIS, SPENCER AND HARRISON

PREDISTRIBUTION PLAN FOR LIQUIDATING PARTNERSHIP

ASSET

Cash $28,250

liquidating expense (8,000) 20,250

Account receivable 44,000

inventory 39,000

land and building 23,000

Equipment 104,000

Total Asset 230,250

Liabilities (47,000)

Net asset 183,250

Asset to be distributed as follows:

Larson(15,000 - 1600) 13,400

Norris(60,000 -2400) 57,600

Spencer(75,000 - 1600) 73,400

Harrison(41,250-2400) 38,850 ( 183,250)

0

Loss

share of liquidation expenses

Larson = 20%*8000 = 1600

Norris = 30%*8000 = 2400

Spencer = 20%*8000= 1600

Harrison = 30%*8000 = 2400

Step-by-step explanation: