E 17-3 Liquidation—Cash distribution computation, safe payments scheduleFed, Ela, and Luc have decided to liquidate their partnership. Account balances on January 1, 2016, are as follows:Cash$160,000Accounts payable$60,000Other assets180,000Fed capital (30%)110,000 $340,000Ela capital (30%)50,000 Luc capital (40%)120,000 $340,000The partners agree to keep a $30,000 contingency fund and to distribute available cash immediately.RequiredDetermine the amount of cash that should be paid to each partner.

Liquidation: Liquidation is a process of dissolving the business, realizing the assets, repaying the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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E 17-3 Liquidation—Cash distribution computation, safe payments schedule

Fed, Ela, and Luc have decided to liquidate their partnership. Account balances on January 1, 2016, are as follows:

Cash	$160,000	Accounts payable	$60,000
Other assets	180,000	Fed capital (30%)	110,000
	$340,000	Ela capital (30%)	50,000
		Luc capital (40%)	120,000
			$340,000

The partners agree to keep a $30,000 contingency fund and to distribute available cash immediately.

Required

Determine the amount of cash that should be paid to each partner.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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