Question
Lump-Sum Liquidation Three university students, Cho, Kenney, and Martinez, operated a successful business, renting furniture and appliances to students residing in dormitories and off-campus apartments.
Lump-Sum Liquidation
Three university students, Cho, Kenney, and Martinez, operated a successful business, renting furniture and appliances to students residing in dormitories and off-campus apartments. The three are now graduating and wish to sell the business before beginning their respective careers. They shared profits in a 1:2:1 ratio. The partnerships current balance sheet is as follows:
| Cash | $10,000 | Accounts payable | $50,000 | |
| Loan receivableCho | 25,000 | Loan payableKenney | 10,000 | |
| Other assets | 140,000 | CapitalCho | 50,000 | |
| CapitalKenney | 35,000 | |||
| CapitalMartinez | 30,000 | |||
| Total assets | $175,000 | Total liabilities and capital | $175,000 |
Another student group, organized as an LLC, wants to buy the business. The LLC's offer of $100,000 for the partnership's other assets is accepted and received by the partnership. Liabilities are then paid and the partnership is liquidated.
Required
How much does each partner receive? Assume that if one of the partners forms a capital deficit, they are insolvent and unable to pay the difference.
| Cash Distribution | |
|---|---|
| Cho | ? |
| Kenney | ? |
| Martinez | ? |
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Fraud Examination Investigative And Audit Procedures
Authors: Joseph T. Wells
1st Edition
089930639X, 978-0899306391
