Read the following as well as any other published articles on the bankruptcy of the partnership of

Laventhol & Horwath:

Laventhol Says It Plans to File for Chapter 11, The Wall Street Journal, November 20, 1990,

p. A3.

Laventhol Partners Face Long Process That Could End in Personal Bankruptcy, The Wall

Street Journal, November 20, 1990, p. B5.

Laventhol Bankruptcy Filing Indicates Liabilities May Be as Much as $2 Billion, The Wall

Street Journal, November 23, 1990, p. A4.

Required

Write a report describing the potential liabilities that the members of a partnership could incur.

EXCEL CASE

The partnership of Wilson, Cho, and Arrington has the following account information:

Share of

Partner Capital Balance Profits and Losses

Wilson . . . . . . . . . . . . . . . $200,000 40%

Cho . . . . . . . . . . . . . . . . . 180,000 20

Arrington . . . . . . . . . . . . . 110,000 40

This partnership will be liquidated, and the partners are scheduled to receive cash equal to any ending positive capital balance. If a negative capital balance results, the partner is expected to contribute that amount. Assume that losses of $50,000 occur during the liquidation followed later by additional and final losses of $100,000.

Required

1. Create a spreadsheet to determine the capital balances that remain for each of the three partners

after these two losses are incurred.

2. Modify this spreadsheet so that it can be used for different capital balances, different allocation

patterns, and different liquidation gains and losses.