4. The partnership of Xavier, Yarnell and Zablicki have decided to liquidate their partnership. At the time, the partners share income and loss in the ratio of 2:2:6. No partner can make any payments into the partnership. The partnership sold the noncash assets for $20,000.

A. Complete the liquidation schedule below

Marshalling of Assets Simple Liquidation
	Cash	Noncash Assets	Liabilities	Y, Loan	X, Capital	Y, Capital	Z, Capital
Beginning balances	$5,000	$40,000	$15,000	$2,000	$12,000	$1,000	$15,000
Sell noncash assets
Pay creditors
Offset loan
Allocated deficit
Payment to partners

B. Now assume the noncash assets were sold for $16,000. Complete the liquidation schedule below

Marshalling of Assets Simple Liquidation
	Cash	Noncash Assets	Liabilities	Y, Loan	X, Capital	Y, Capital	Z, Capital
Beginning balances	$5,000	$40,000	$15,000	$2,000	$12,000	$1,000	$15,000
Sell noncash assets
Pay creditors
Offset loan
Allocated deficit
Payment to partners

The MDS partnership has decided to liquidate. At the time, the profit and loss ratios for Murphy,

Donnelly and Sullivan were 1:1:3. The balance sheet is below.

Cash $ 30,000 Liabilities $ 20,000

Other assets 170,000 M, Capital 50,000

D, Capital 70,000

S, Capital 60,000

$200,000 $200,000

C. Using the loss absorption potential system, determine how the partners will share in the distribution of cash

Loss Absorption Potential
	M	D	S
Capital
P & L ratio
LAP (capital/P&L)

	Loss Absorption Potential			Asset Distribution
	M	D	S	M	D	S
P & L ratio
LAP
Net capital interest
Distribution to D (100 0.2)
Distribution to M & D (150 0.2)

D. Prepare an advance plan for the distribution of cash

Advance Cash Distribution Plan
Order of cash distribution	Liabilities	M	D	S