On November 1, 2019, the firm of Sails, Welch and Greenberg decided to liquidate their partnership. The partners have capital balances of $58,000, $72,000 and $10,000 respectively. The cash balance is $32,000, the book values of the noncash assets total $128,000, and liabilities total $20,000. The partners share income and losses in the ratio of 2:2:1.

Instructions:

Prepare a statement of partnership liquidation, covering the period November 1-30, 2019, for each of the following assumptions:

All of the noncash assets are sold for $55,000 in cash, the creditors are paid, the partner with the debit capital balance pays the amount owed to the firm, and the remaining cash is distributed to the partners. (b)

1. Assume the partner with the capital deficiency in part (b) declares bankruptcy and is unable to pay the deficiency. Determine the manner in which the remaining cash is distributed to the two other partners.