1.On 12/31/2010, the partnership's balance sheet was as below:

Assets Liabilities

Cash 5,000 Accounts Payable 35,000

Accounts Receivable 10,000 Capital-Frank 5,000

Land 20,000 Capital-Mike 15,000

PPE 15,000 Capital Nick 10,000

Inventory 15,000

Total Assets 65,000 Total Liabilities 65,000

Note that the profit/loss sharing ratio for the 3 partners was: 35%/35%/30% (round to the nearest dollar)

a.The partnership decided to terminate the entity and sold everything for cash on 01/01/2011. Accounts receivable was sold for $5,000 and Land was sold for $25,000. PPE was sold for 5,000 and inventory was sold for 7,000. Liquidation fee (paid to liquidator) was 5,000. Assuming that after liquidation starts, any partner with negative capital balance will contribute cash to bring the balance to 0, calculate how much each partner is entitled to after terminating the partnership. (10 points)

b.Please work out the pre-distribution schedule for the partnership on behalf of the liquidator and explain what each step means. (20 points)