Lump-Sum Liquidation Three university students, Cho, Kenney, and Martinez, operated a successful business, renting furniture and appliances to students residing in dormitories and off-campus apartments. The three are now graduating and wish to sell the business before beginning their respective careers. They shared profits in a 2:1:1 ratio. The partnership’s current balance sheet is as follows: Cash $6,000 Accounts payable $60,000 Loan receivable—Cho 25,000 Loan payable—Kenney 10,000 Other assets 158,000 Capital—Cho 30,000 Capital—Kenney 30,000 Capital—Martinez 59,000 Total assets $189,000 Total liabilities and capital $189,000 Another student group, organized as an LLC, wants to buy the business. The LLC's offer of $117,000 for the partnership's other assets is accepted. After receipt of the $117,000, the liabilities are paid and the partnership is liquidated. Required How much does each partner receive? Assume that if one of the partners forms a capital deficit, they are insolvent and will be unable to pay the difference.
Lump-Sum Liquidation Three university students, Cho, Kenney, and Martinez, operated a successful business, renting furniture and appliances to students residing in dormitories and off-campus apartments. The three are now graduating and wish to sell the business before beginning their respective careers. They shared profits in a 2:1:1 ratio. The partnership’s current balance sheet is as follows: Cash $6,000 Accounts payable $60,000 Loan receivable—Cho 25,000 Loan payable—Kenney 10,000 Other assets 158,000 Capital—Cho 30,000 Capital—Kenney 30,000 Capital—Martinez 59,000 Total assets $189,000 Total liabilities and capital $189,000 Another student group, organized as an LLC, wants to buy the business. The LLC's offer of $117,000 for the partnership's other assets is accepted. After receipt of the $117,000, the liabilities are paid and the partnership is liquidated. Required How much does each partner receive? Assume that if one of the partners forms a capital deficit, they are insolvent and will be unable to pay the difference.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Lump-Sum Liquidation
Three university students, Cho, Kenney, and Martinez, operated a successful business, renting furniture and appliances to students residing in dormitories and off-campus apartments. The three are now graduating and wish to sell the business before beginning their respective careers. They shared profits in a 2:1:1 ratio. The
| Cash | $6,000 | Accounts payable | $60,000 | |
| Loan receivable—Cho | 25,000 | Loan payable—Kenney | 10,000 | |
| Other assets | 158,000 | Capital—Cho | 30,000 | |
| Capital—Kenney | 30,000 | |||
| Capital—Martinez | 59,000 | |||
| Total assets | $189,000 | Total liabilities and capital | $189,000 |
Another student group, organized as an LLC, wants to buy the business. The LLC's offer of $117,000 for the partnership's other assets is accepted. After receipt of the $117,000, the liabilities are paid and the partnership is liquidated.
Required
How much does each partner receive? Assume that if one of the partners forms a capital deficit, they are insolvent and will be unable to pay the difference.
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