kThe Pen, Evan, and Torves Partnership has asked you to assist in winding-up its business affairs. You compile the following information:1. The partnership's trial balance on June 30, 20X1, isCashAccounts Receivable (net)InventoryPlant and Equipment (net)Accounts PayablePen, CapitalEvan, CapitalTorves, CapitalTotalProfit and loss percentagesPreliquidation capital balancesLoss absorption potential (capital balances/loss percent)Decrease highest LAP to next highestDebit$ 7,80834,00024,80899,908Decrease LAPs to next highest:$ 164,9082. The partners share profits and losses as follows: Pen, 50 percent; Evan, 25 percent; and Torves, 25 percent.3. The partners are considering an offer of $110,000 for the firm's accounts receivable, inventory, and plant and equipment as of June30. The $110,000 will be paid to creditors and the partners in installments, the number and amounts of which are to be negotiated.Required:Prepare a cash distribution plan as of June 30, 20X1, showing how much cash each partner will receive if the partners accept the offerto sell the assets.Credit$ 10,40065,00055,50034,000$ 7,000PenPET PARTNER SHIPCash Distribution PlanJune 30, 20X1Loss Absorption PotentialEvanTorvesPenCapital AccountsEvanTorves

A cash distribution plan is the plan which is made by the company so that any loss can be made which…

Answered: Prepare a cash distribution plan as of…

Prepare a cash distribution plan as of June 30, 20X1, showing how much cash each partner will receive if the partners accept the offer to sell the assets.

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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Concept explainers

Partnership Accounting

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

Partner Admission and Withdrawal

A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is 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, drawings of a partner, etc.

Question

k
The Pen, Evan, and Torves Partnership has asked you to assist in winding-up its business affairs. You compile the following information:
1. The partnership's trial balance on June 30, 20X1, is
Cash
Accounts Receivable (net)
Inventory
Plant and Equipment (net)
Accounts Payable
Pen, Capital
Evan, Capital
Torves, Capital
Total
Profit and loss percentages
Preliquidation capital balances
Loss absorption potential (capital balances/loss percent)
Decrease highest LAP to next highest
Debit
$ 7,808
34,000
24,808
99,908
Decrease LAPs to next highest:
$ 164,908
2. The partners share profits and losses as follows: Pen, 50 percent; Evan, 25 percent; and Torves, 25 percent.
3. The partners are considering an offer of $110,000 for the firm's accounts receivable, inventory, and plant and equipment as of June
30. The $110,000 will be paid to creditors and the partners in installments, the number and amounts of which are to be negotiated.
Required:
Prepare a cash distribution plan as of June 30, 20X1, showing how much cash each partner will receive if the partners accept the offer
to sell the assets.
Credit
$ 10,400
65,000
55,500
34,000
$ 7,000
Pen
PET PARTNER SHIP
Cash Distribution Plan
June 30, 20X1
Loss Absorption Potential
Evan
Torves
Pen
Capital Accounts
Evan
Torves

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