Lump-sum liquidations: liquidation of partnership in which all assets are converted into cash within a short time, creditors are paid, and a single lump-sum payment is made to the partners for their capital interests. Partnership may experiences losses on disposal of assets, because it has to make offer below the normal selling price to encourage immediate sales. The partnership attempts to collect receivable has to offer large cash discounts for prompt payments. Any goodwill on the partnership books is generally written off when the partnership begins liquidation because it is no longer a going concern. In some situations a deficit may occur in a partner’s capital account if its credit balance is too low to absorb share of losses, such deficit may be cleared by either partner investing cash or other asset or the partner’s capital deficit is distributed to the other partners in their resulting loss sharing ratio. The amount of cash each partner will receive as liquidating distribution when equipment is sold for the amount stated in each of the following cases.

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Chapter 16, Problem 16.3E

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Lump-sum liquidations: liquidation of partnership in which all assets are converted into cash within a short time, creditors are paid, and a single lump-sum payment is made to the partners for their capital interests. Partnership may experiences losses on disposal of assets, because it has to make offer below the normal selling price to encourage immediate sales. The partnership attempts to collect receivable has to offer large cash discounts for prompt payments. Any goodwill on the partnership books is generally written off when the partnership begins liquidation because it is no longer a going concern.

In some situations a deficit may occur in a partner’s capital account if its credit balance is too low to absorb share of losses, such deficit may be cleared by either partner investing cash or other asset or the partner’s capital deficit is distributed to the other partners in their resulting loss sharing ratio.

The amount of cash each partner will receive as liquidating distribution when equipment is sold for the amount stated in each of the following cases.

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Adams, Peters, and Blake share profits and losses for their APB Partnership in a ratio of 2:3:5. When they decide to liquidate, the balance sheet is as follows: Cash Adams, Loan: Other Assets Assets Total Assets Liabilities Adams, Capital Peters, Capital Blake, Capital Total Liabilities and Equities Liquidation expenses are expected to be negligible. No interest accrues on loans with partners after termination of the business. Required: Prepare a cash distribution plan for the APB Partnership. Please follow the practical guidelines when completing this worksheet. Profit and loss percentages Preliquidation capital balances Loan to Adams Total Loss absorption potential Decrease highest LAP to next highest Adams $ 51,000 12,200 222,000 $285,200 Decrease LAPs to next highest Adams Peters ✪ 00 Adams Loss Absorption Potential Peters 335,500 (30.500) $ 305,000 O (142,400) O $ 162.600 Answer is not complete. APB PARTNERSHIP Cash Distribution Plan Liabilities and Capital 305,000 $ 305,000…

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