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.