The Drysdale, Koufax, and Marichal partnership has the following balance sheet immediately prior to liquidation: Cash $ 61,000 Liabilities $ 55,000 Noncash assets 329,000 Drysdale, loan 42,500 Drysdale, capital (50%) 107,500 Koufax, capital (30%) 97,500 Marichal, capital (20%) 87,500 a-1. Determine the maximum loss that can be absorbed in Step 1. Then, assuming that this loss has been incurred, determine the next maximum loss that can be absorbed in Step 2. a-2. Liquidation expenses are estimated to be $21,000. Prepare a predistribution schedule to guide the distribution of cash. Further, modify the tags in explanation as well. b. Assume that assets costing $99,000 are sold for $72,500. How is the available cash to be divided?
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.
The Drysdale, Koufax, and Marichal
| Cash | $ | 61,000 | Liabilities | $ | 55,000 |
| Noncash assets | 329,000 | Drysdale, loan | 42,500 | ||
| Drysdale, capital (50%) | 107,500 | ||||
| Koufax, capital (30%) | 97,500 | ||||
| Marichal, capital (20%) | 87,500 | ||||
- a-1. Determine the maximum loss that can be absorbed in Step 1. Then, assuming that this loss has been incurred, determine the next maximum loss that can be absorbed in Step 2.
- a-2. Liquidation expenses are estimated to be $21,000. Prepare a predistribution schedule to guide the distribution of cash. Further, modify the tags in explanation as well.
- b. Assume that assets costing $99,000 are sold for $72,500. How is the available cash to be divided?
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