Exercise 7 (LO 8, 9) Installment liquidation with deficit capital balances and personal insolvency. Twelve years ago, Adams, Boyd, and Chambers formed a partnership manufacruring small circuit boards. Unfortunately, foreign competition, a softening economy and management errors have led the partners to realize that the company's business cannot be sustained and that the partnership must be liquidated. A condensed balance sheet is as follows: Cash 170,000 15,000 10,000 32,000 225,000 Other liabilities Capital, Adams Capital, Boyd Capital, Chambers . . .. . The current value of personal assets and liabilities of the partners, excluding those related to the partnership, are as follows: Adams Chambers $170,000 150,000 Boyd is extremely concerned that after liquidation of the partnership they would still con- tinue to be personally insolvent. This would be devastating to Boyd, and they have come to you $62,000 78,000 $185,000 Personal liabilities 72,000 with their concerns. Prepare a response to each of Boyd's independent questions noting that profits and losses are allocated 40%, 20%, and 20% to Adams, Boyd, and Chambers, respective! 1. If assets with a book value of $180,000 were sold for $200,000 and the partners agreed to main- tain a minimum cash balance of $5,000, would any of the available cash be distributed to Bo ted, would any of the available cash be distributed to Boyd? fied outside creditors, how much would Boyd be liable to Adams for? available cash Boyd could liquidate their personal liabilities? 2. If all of the noncash assets were sold for net proceeds of $280,000 and all cash was distribu 3. Assume that all of the noncash assets were sold for net proceeds of $150,000 and all cash was distributed. If Adams contributed the necessary assets to the partnership to liquidate unsatis- 4. How much would all of the noncash assets have to be sold for so that after distributing all