John and Joseph were in business for several years, sharing profits and losses equally. Because of Jose’s poor health, they decided to liquidate the partnership. John managed the liquidation because Joseph was in the hospital. Just before liquidation, the partnership balance sheet contained the following information: Cash P 800,000 Liabilities P 500,000 Other Assets P 2,200,000 John, Capital P 1,000,000 Joseph, Capital P 1,500,000 Total Assets P 3,000,000 Total Liabilities & Equity P 3,000,000 Wally (1) sold the other assets for P 1,750,000, (2) paid off all the creditors, and (3) divided the remaining cash between them, according to their profit and loss sharing ratio. Joseph received a note from John that read “Good news – sold other assets for P 1,750,000. Have P 1,025,000 check waiting for you. Get well soon.” Because he will not be released from the hospital for several days, Joseph asks you to review John’s liquidation and cash distribution procedures. Do you approve John’s liquidation and cash distribution procedures? If you think John’s computation is not correct, what amount of final cash settlement should Joseph receive? Explain why.
John and Joseph were in business for several years, sharing profits and losses equally. Because of Jose’s poor health, they decided to liquidate the
Cash P 800,000 Liabilities P 500,000
Other Assets P 2,200,000 John, Capital P 1,000,000
Joseph, Capital P 1,500,000
Total Assets P 3,000,000 Total Liabilities & Equity P 3,000,000
Wally (1) sold the other assets for P 1,750,000, (2) paid off all the creditors, and (3) divided the remaining cash between them, according to their
Joseph received a note from John that read “Good news – sold other assets for P 1,750,000. Have P 1,025,000 check waiting for you. Get well soon.” Because he will not be released from the hospital for several days, Joseph asks you to review John’s liquidation and cash distribution procedures.
Do you approve John’s liquidation and cash distribution procedures? If you think John’s computation is not correct, what amount of final cash settlement should Joseph receive? Explain why.
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