Problem 1: Partnership Installment Liquidation (9 Points)

The partnership of Adam, Bruce and Cayla is about to begin an installment liquidation with the following account balances:

Cash $ 90,000 Liabilities$ 60,000

Noncash assets 300,000 Adam, capital 85,000

Bruce, capital 105,000

Cayla, capital 140,000

Total assets $ 390,000 Total Liab. & OE$ 390,000

Estimated maximum amount of liquidation expenses total $10,000. Adam, Bruce and Cayla share profits and losses in the ratio of 4:2:4. Before liquidating any assets and paying off the liabilities, the partners wants to distribute all available cash at the time.

(1) How much cash is available for distribution at this time? (1 point) Answer: ___________

(2) Use the following schedule of safe payments to determine the amount of cash each partner should receive: (2 points)

Capital Balances (in000s)

Adam Bruce Cayla

Pre-distribution balances:

Adam: ___________ Bruce: ____________ Cayla: ___________

(3) After the distribution above, all liabilities and actual liquidation expenses of $8,000 were paid. There will be no more liquidation expenses during the rest of the liquidation. Provide one single set of journal entry to record these payments. (1 point)

(4) One month later, $180,000 of the noncash assets were sold for $25,000. How much is each partners capital balance following this sale? (2 points)

Adam: ___________ Bruce: ____________ Cayla: ___________

5) At this time, the partnership would like to have another round of cash distribution. How much cash is available for distribution? (1 point)Answer: _____________

(6) Use a schedule of safe payments to determine how this available cash should be Distributed among the three partners? (Note: Liquidation is not yet over at this point.) (2 points)

Capital Balances (in000s)

Adam Bruce Cayla

Pre-distribution balance:

Adam: ___________ Bruce: ____________ Cayla: ___________

I am especially confused with 4-6. Thanks for the help!