Problem 4

After 25 years of operations, the Dennison, Edwards, and Smith partnership has decided to liquidate. At that time, 1/1/20x2, the partnership balance sheet is as follows:

Dennison, Edwards, and Smith Partners Balance Sheet
as of 1/1/20x2
Assets		Liabilities and Partners Capital
Cash	$125,000	Liabilities	$80,000
Noncash assets	200,000	Dennison, Capital	140,000
		Edwards, Capital	125,000
		Smith, Capital	(20,000)
Total assets	$325,000	Total Liabilities & Capital	$325,000

In accordance with the Articles of Partnership, the partners agreed to share profits and losses as follows:

Dennison, Capital	40%
Edwards, Capital	30%
Smith, Capital	30%

The partnership estimates liquidation expenses of $8,500.

Required

Before beginning liquidation activities, the partnership agrees that Smith must eliminate her deficit balance. Assuming the noncash assets have zero value, what is the maximum amount she must contribute to the partnership to eliminate the deficit balance in her capital account?

Based on the information above, prepare a schedule of safe payments for the partners.

Assuming the partnership receives $100,000 for noncash assets and they are ready to finalize their liquidation, prepare a formal Statement of Liquidation for the partnership, in good form.