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PROBLEM 16-4 Simple Liquidation with Personal Asset Information Mary, Paula, and Ray have operated a retail store for 20 years. The partners share profits and
PROBLEM 16-4 Simple Liquidation with Personal Asset Information | ||||||||
Mary, Paula, and Ray have operated a retail store for 20 years. The partners share profits and losses in the ratio | ||||||||
of 4:3:3, respectively. The partnership is unable to meet its obligations and the partners decide to liquidate the | ||||||||
partnership. The firms balance sheet just before the partners sell the other assets for $20,000 is as follows. | ||||||||
Assets Liabilities and Partners Equities | ||||||||
Cash $ 10,000 Liabilities $ 40,000 | ||||||||
Other Assets 100,000 Mary, Capital 50,000 | ||||||||
Paula, Capital 10,000 | ||||||||
Ray, Capital 10,000 | ||||||||
$110,000 $110,000 | ||||||||
After the sale of the noncash assets, the personal assets and liabilities of each partner are determined to be the | ||||||||
following: | ||||||||
Personal Personal | ||||||||
Assets Liabilities | ||||||||
Mary $50,000 $80,000 | ||||||||
Paula 30,000 10,000 | ||||||||
Ray 30,000 50,000 | ||||||||
The partnership operates in a state that has adopted the Uniform Partnership Act. | ||||||||
Required: | ||||||||
A. Determine the amount of cash each partner will receive in liquidation and how much cash each partner must | ||||||||
contribute to the firm, given their personal positions. | ||||||||
B. Determine the amounts that the personal creditors will receive from personal assets and any distribution from | ||||||||
the partnership. | ||||||||
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