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Problem 5-3

Safe Payment
Schedule 1

Capital Balances
Possible loss (175,000)
Balances
Additional Loss (Deficiency)
Balances
Additional Loss (Deficiency)
Payment to partners

Schedule 2
Capital Balaces
Possible loss
Payment to partners

SS, capital
TT, capital
50,000.00
60,000.00
(58,333.33) (58,333.33)
(8,333.33)
1,666.67
8,333.33
(4,166.67)
(0.00)
(2,500.00)
2,500.00

SS, capital
TT, capital
38,000.00
48,000.00
(38,000.00) (38,000.00)
10,000.00

Cash Priority Program


PP, capital
80,000.00
(58,333.33)
21,666.67
(4,166.67)
17,500.00
(2,500.00)
15,000.00
PP, capital
53,000.00
(38,000.00)
15,000.00

Capital Balances
Income sharing ratio
Loss absorption ability
Priority I
Balances
Priority II
Balances

SS
60,000
1
60,000

TT
70,000
1
70,000

60,000

70,000
(10,000)
60,000

60,000

PP
90,000
1
90,000
(20,000)
70,000
(10,000)
60,000

Any amount in excess of 120,000 to the

SS

TT

To creditors before partners receive anything 80,000

in excess of 120,000 to the three partners in in sharing ratio

1/3

10,000
10,000
1/3

PP

Total

20,000

20,000

10,000
30,000

20,000
40,000

1/3

Problem 5-5
AB, CD & EF Partnership
Schedule of Safe Payments
Schedule 1: January
Capital and Loan Balances
Possible Loss:
Other Assets (189,000)
Possible Liquidation Cost (10,000)
Balances
Absorption of AB's potential def bal:
CD (22,500*3/5)
EF (22,500*2/5)

AB (50%)
74,000.00
(94,500.00)
(5,000.00)
(25,500.00)
25,500.00
-

Safe Payment

Schedul 2: February
Capital and Loan Balances
Possible Loss:
Other Assets (189,000)
Possible Liquidation Cost (6,000)
Balances
Absorption of AB's potential def bal:
CD (22,500*3/5)
EF (22,500*2/5)
Safe Payment

AB (50%)
72,000.00
(94,500.00)
(3,000.00)
(25,500.00)
25,500.00
-

Cash Distribution Program

Capital Balances

AB (50%)
118,000.00

Loan
Total Interest
Divide By
Loss absorption balances
Priority I to EF
Balances

(30,000.00)
88,000.00
0.50
176,000.00
176,000.00

Priority II to CD, EF
Balances

176,000.00

Excess to AB, CD, EF


Payment to Partners

CD (30%)
101,600.00

EF (20%)
68,400.00

(56,700.00)

(37,800.00)

(3,000.00)
41,900.00

(2,000.00)
28,600.00

(15,300.00)
-

(10,200.00)
26,600.00

18,400.00

CD (30%)
73,800.00

EF (20%)
49,200.00

(56,700.00)

(37,800.00)

(1,800.00)
15,300.00

(1,200.00)
10,200.00

(15,300.00)
-

(10,200.00)
-

Cash
CD (30%)
90,000.00

EF (20%)
74,000.00

20,000.00
110,000.00
0.30
366,666.67
366,666.67

74,000.00
0.20
370,000.00
(3,333.33)
366,666.67

(190,666.67)
176,000.00

(190,666.67)
176,000.00

AB (50%)

48,000.00
48,000.00

Cash Payments
CD (30%)
EF (20%)

Total

666.67

666.67

30,600.00
30,600.00

19,733.33
20,400.00

50,333.33
51,000.00

28,800.00

19,200.00

96,000.00

59,400.00

39,600.00

147,000.00

PROBLEM 5-7
CASH DISTRIBUTION PROGRAM
Profit and loss ratio
Pre-liquidation capital and loan balances
Loss absorption balances
Decrease highest LAB to next highest:
Gold: (30,000 x .30)
Decrease LAB's to next highest:
Gold: (10,000 x .30)
Silver: (10,000 x .20)

Bronze
50%

Gold
30%

P110,000

P150,000

110,000

(30,000)
120,000
(10,000)

P110,000

P110,000

Summary of Cash Distribution


(If Offer of P100,000 is Accepted)

Cash available
First
Next
Next
Additional paid in P&L ratio

P106,000
(17,000)
(9,000)
(5,000)
(75,000)
P -0-

Statement of Liquidation

Beginning Balances
Loss on Realization
Balances
Liabilities
Balances
Loan to Partners
Balances

Cash
6000
100000
106,000
-7500
98,500
-19500
79,000

Other Assets
135000
-135000
0
0
0

Silver
20%

Bronze

Gold

Silver

P55,000

P45,000

P24,000

55,000

(9,000)
36,000

24,000

P120,000

120,000

(3,000)
(10,000)
P110,000

Accounts Payable

P 55,000

Bronze
50%

P 33,000

Gold
30%

(2,000)
P 22,000

Silver
20%

P17,000

P17,000

A/P
7500
7500
-7500
0
0

P37,500
P37,500

P9,000
3,000
22,500
P34,500

Bronze, Loan
12000

Silver, Loan
7500

12000

7500

12000
-12000
0

7500
-7500
0

P2,000
15,000
P17,000

50
30
Bronze
Gold
17000 67000
-17500 -10500
-500 56500
-500
12000
11500

56500
56500

20
Silver
-45000
-7000
-52000
38000
7500
45500

PROBLEM 5-9
SAFE PAYMENTS

Capital and loan balances, Aug.1


Write-off of 24,000 as goodwill

24,000.00

40%
Dan

30%
Red

(42,000.00)

(45,000.00)

30%
Ben
(17,000.00)

9,600.00

7,200.00

7,200.00

4,800.00

3,600.00

3,600.00

Write-off of 12,000 of receivables

12,000.00
Gain of 6,000

6,000.00
Balances, Aug.31
Possible loss of 16,000 + 32,000

48,000.00

(2,400.00)
(30,000.00)

(1,800.00)
(36,000.00)

(1,800.00)
(8,000.00)

19,200.00

14,400.00

14,400.00

1,600.00
(9,200.00)
4.34

1,200.00
(20,400.00)
3.26

(9,195.66)

(20,396.74)

Possible liquidation cost:

4,000.00
Balances
Ben's potential deficit

Safe payments to partners

1,200.00
7,600.00
(7.60)

7,592.40

CASH DISTRIBUTION PROGRAM


40%
Dan

Balances
30%
Red

Capital
Loan
Total interest
Ratio
Loss absortion potential
Priority I to Red
Balances

26,000.00
16,000.00
42,000.00
0.40
105,000.00
105,000.00

45,000.00
45,000.00
0.30
150,000.00
(45,000.00)
105,000.00

Pririoty II to Dan and Red

(48,333.00)

(48,333.00)

Balances

56,667.00

56,667.00

30%
Ben
17,000.00
###
17,000.00
###
56,666.67
56,666.67

56,666.67

Payments
Dan

Red

Ben

Total

13,500.00

13,500.00

19,333.00

14,500.00

33,833.00

19,333.00

28,000.00

47,333.00