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Need help with the incorrect answers Liquidation schedule-one negative capital account with no capital contribution The ABC partnership reports the following condensed balance sheet: Cash
Need help with the incorrect answers
Liquidation schedule-one negative capital account with no capital contribution The ABC partnership reports the following condensed balance sheet: Cash $252,500 Liabilities $400,000 Noncash assets 637,500 Partner A, capital 225,000 Partner B, capital 225,000 Partner C, capital 40,000 Total assets $890,000 Total liabilities and partner capital $890,000 The partners wish to liquidate the partnership. The noncash assets are sold for $500,000 with the loss distributed to the partners in the ratio of 30%/30%/40% to partner A, B, and C, respectively. The liabilities are paid in full. Assume that any partners with a negative balance in their respective Capital Accounts are insolvent and, therefore, do not make any capital contribution to the partnership (i.e., remaining partners must absorb the negative Capital Account according to their profit sharing formula). Prepare a schedule detailing the liquidation of the assets, repayment of the liabilities, and distribution of the remaining cash to the partners. HINT: Use a negative sign with answers that reduce account balances. HINT: Use a negative sign with answers that reduce account balances. Liquidation Schedule of ABC Partnership -----Capital Accounts----- Liabilities 400,000 * $ $ Capital account, prior to liquidation $ Sale of noncash assets Cash 252,500 500,000 V 752,500 ~ O 137,500 X (400,000) (352,500) * (352,500) 0 Allocation of deficit Noncash Assets $ 637,500 (500,000) X 137,500 x 0 0 0 o 0 $ 0 225,000 * $ 0 x Ox OX 0 OX 225,000 * $ Ox O * o OX OX 0 $ 40,000 * ox 0 x ov ov o 0 ov Payment of creditors 0 Distribution to partners Post-liquidation balances 0 0 OX 0 $ $ $ $ Liquidation schedule-one negative capital account with no capital contribution The ABC partnership reports the following condensed balance sheet: Cash $252,500 Liabilities $400,000 Noncash assets 637,500 Partner A, capital 225,000 Partner B, capital 225,000 Partner C, capital 40,000 Total assets $890,000 Total liabilities and partner capital $890,000 The partners wish to liquidate the partnership. The noncash assets are sold for $500,000 with the loss distributed to the partners in the ratio of 30%/30%/40% to partner A, B, and C, respectively. The liabilities are paid in full. Assume that any partners with a negative balance in their respective Capital Accounts are insolvent and, therefore, do not make any capital contribution to the partnership (i.e., remaining partners must absorb the negative Capital Account according to their profit sharing formula). Prepare a schedule detailing the liquidation of the assets, repayment of the liabilities, and distribution of the remaining cash to the partners. HINT: Use a negative sign with answers that reduce account balances. HINT: Use a negative sign with answers that reduce account balances. Liquidation Schedule of ABC Partnership -----Capital Accounts----- Liabilities 400,000 * $ $ Capital account, prior to liquidation $ Sale of noncash assets Cash 252,500 500,000 V 752,500 ~ O 137,500 X (400,000) (352,500) * (352,500) 0 Allocation of deficit Noncash Assets $ 637,500 (500,000) X 137,500 x 0 0 0 o 0 $ 0 225,000 * $ 0 x Ox OX 0 OX 225,000 * $ Ox O * o OX OX 0 $ 40,000 * ox 0 x ov ov o 0 ov Payment of creditors 0 Distribution to partners Post-liquidation balances 0 0 OX 0 $ $ $ $Step by Step Solution
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