Lump-Sum LiquidationThree 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 nowgraduating and wish to sell the business before beginning their respective careers. They shared profits in a 7.5.4 ratio The partnership's current balance sheet is as follows:Cash$6,000 Accounts payable$60,00010,00025,000 Loan payable-Kenney15,000 Capital—Cho27,00028,000140,000 Capital-KenneyCapital-Martinez61,000Total assets$186,000 Total liabilities and capital $186,000Another student group, organized as a corporation, wants to buy the business. Their offer of $105,000 for the equipment and $12,000 for the receivables is accepted. After receipt of the $117,000, the liabilities arepaid and the partnership is liquidated.RequiredHow much does each partner receive?Cash DistributionCho$9,000Kenney $ 23,000Martinez $ 49,000ReceivablesLoan receivable-ChoRental equipment, net

Loss on liquidation:We need to determine loss on liquidation after realisation of assets and…

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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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Total Allowable Deductions if Mr. Queen registered his business venture as a One Person Corporation
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8 D es Required information [The following information applies to the questions displayed below.] Tiffany and Carlos decided to liquidate their jointly owned corporation, Royal Oak Furniture (ROF). After liquidating its remaining inventory and paying off its remaining liabilities, ROF had the following tax accounting balance sheet: Cash Building Land Total FMV Adjusted Tax Basis $ 200,000 $ 200,000 50,000 150,000 10,000 200,000 $ 400,000 $ 410,000 Appreciation (Depreciation) Gain or loss recognized 40,000 (50,000) $ (10,000) Under the terms of the agreement, Tiffany will receive the $200,000 cash in exchange for her 50 percent interest in ROF. Tiffany's tax basis in her ROF stock is $50,000. Carlos will receive the building and land in exchange for his 50 percent interest in ROF. His tax basis in the ROF stock is $100,000. Assume for purposes of this problem that the cash available to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized…
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