The Drysdale, Koufax, and Marichal partnership has the following balance sheet immediately prior to liquidation:

Cash	$	56,000	Liabilities	$	57,500
Noncash assets		304,000	Drysdale, loan		32,500
			Drysdale, capital (50%)		100,000
			Koufax, capital (30%)		90,000
			Marichal, capital (20%)		80,000

1. a-1. Determine the maximum loss that can be absorbed in Step 1. Then, assuming that this loss has been incurred, determine the next maximum loss that can be absorbed in Step 2.
2. a-2. Liquidation expenses are estimated to be $16,000. Prepare a predistribution schedule to guide the distribution of cash. Further, modify the tags in explanation as well.
3. b. Assume that assets costing $94,000 are sold for $70,000. How is the available cash to be divided?

A-1.

Determine the maximum loss that can be absorbed in Step 1. Then, assuming that this loss has been incurred, determine the next maximum loss that can be absorbed in Step 2.

Partner	Capital Balance	Loss Allocation		Maximum Loss That Can Be Absorbed
Step 1
Drysdale			%
Koufax			%
Marichal			%
Step 2
Koufax			%
Marichal			%

A-2

Liquidation expenses are estimated to be $16,000. Prepare a predistribution schedule to guide the distribution of cash. Further, modify the tags in explanation as well.

DRYSDALE, KOUFAX, AND MARICHAL
Distribution of Available Cash
First		Liabilities
		Liquidation expenses
Next				%
Next				%
				%
All remaining cash				%
				%
				%

B

Assume that assets costing $94,000 are sold for $70,000. How is the available cash to be divided?

Cash available for distribution:
Beginning cash balance
Sale of noncash assets
Subtotal				$0
Payment of liabilities
Payment of estimated liquidation expenses
Cash available for distribution				$0
Cash distribution to partners:
	Drysdale	Koufax	Marichal	Total
First
Next
Next
Total	$0	$0	$0	$0