ACTTG 028

ASSIGNMENT 4 - Liquidation (Cash Priority Program)

A partnership currently holds three assets: cash, $10,000; land, $35,000; and a building, $50,000
Capital balances are as follows:
Ace, capital . . . . . . . . . . . . . . . . . $25,000
Ball, capital . . . . . . . . . . . . . . . . . 28,000
Eaton, capital . . . . . . . . . . . . . . . . 20,000
Lake, capital . . . . . . . . . . . . . . . . . 22,000
The partners share profits and losses as follows: Ace (30%), Ball (30%), Eaton (20%), and Lake

0.30 0.30 0.20

Ace, Capital Ball, Capital Eaton, Capital
Partner's interest before liq 25,000.00 28,000.00 20,000.00
Liquidation expense (1,500.00) (1,500.00) (1,000.00)
Unsold NCA (25,500.00) (25,500.00) (17,000.00)
Balance (2,000.00) 1,000.00 2,000.00
Absorption of deficiency 2,000.00 (857.14) (571.43)
Balance (cash distribution) - 142.86 1,428.57
$35,000; and a building, $50,000. The partners anticipate that expenses required to liquidate their partnership will am

l (30%), Eaton (20%), and Lake (20%). If a preliminary distribution of cash is to be made, how much will each partne

0.20 Alternative solution:

Lake, Capital Ace, Capital Ball, Capital
22,000.00 Partners' interest 25,000.00 28,000.00
(1,000.00) (5,000.00) Div by: P/L Ratio 3/10 3/10
(17,000.00) (85,000.00) Loss Absorption Balance 83,333.33 93,333.33
4,000.00 Priority I - Lake
(571.43) Balance 83,333.33 93,333.33
3,428.57 Priority II - Lake and Eaton
Balance 83,333.33 93,333.33
Priorty III - Lake, Eaton and Ball (10,000.00)
Balance 83,333.33 83,333.33
Priorty IV - Distribute Cash Regular P/L Ratio
 their partnership will amount to $5,000.

w much will each partner receive?

Cash payments
Eaton, Capital Lake, Capital Ace, Capital Ball, Capital Eaton, Capital Lake, Capital
20,000.00 22,000.00
2/10 2/10
100,000.00 110,000.00
(10,000.00) 2,000.00
100,000.00 100,000.00
(6,666.67) (6,666.67) 1,333.33 1,333.33
93,333.33 93,333.33
(10,000.00) (10,000.00) 3,000.00 2,000.00 2,000.00
83,333.33 83,333.33 3,000.00 3,333.33 5,333.33
 Cash distribution schedule
Cash available
Balance 10,000.00 Priority I - Lake
Payment of liq (5,000.00) Priority II - Lake and Eaton
Cash available 5,000.00 Priority III:
Lake
Eaton
Ball
TOTAL
Ace Ball Eaton Lake Total
2,000.00 2000
1,333.33 1,333.33 2666.66

142.86
95.24
95.24 333.34
142.86 1,428.57 3,428.57 5000