The following balances is for a local partnership in which the partners have become very unhappy with each other.
Cash . . . . . . . . . . . . . . . . . . . $ 40,000 Liabilities . . . . . . . . . . .. . . . . $ 30,000
Land . . . . . . . . . . . . . . . . . . . 130,000 Adams, capital . . . . . . . . . . . 80,000
Building . . . . . . . . . . . . . . . . 120,000 Baker, capital . . . . . . . . . . . . . . . . 30,000
Carvil, capital . . . . . . . . . . . . . 60,000
Dobbs, capital . . . . . . . . . . . . . 90,000
To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as an independentsituation related to the partnership’s liquidation.
a. The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 2:3:3:2 basis, respectively, how will the $10,000 be divided?
b. The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated on a 2:2:3:3 basis, respectively, how will the $10,000 be divided?
c. The building is immediately sold for $70,000 to give total cash of $110,000. The liabilities are then paid, leaving a cash balance of $80,000. This cash is to be distributed to the partners.
How much of this money will each partner receive if profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 1:3:3:3 basis, respectively?
d. Assume that profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 1:3:4:2 basis, respectively. How much money must the firm receive from selling the land and building to ensure that Carvil receives a portion?
