28. Following is a series of independent cases. In each situation, indicate the cash distribution to be made at the end of the liquidation process. Unless otherwise stated, assume that all solvent pa

28. Following is a series of independent cases. In each situation, indicate the cash distribution to be

made at the end of the liquidation process. Unless otherwise stated, assume that all solvent partners

will reimburse the partnership for their deficit capital balances.

Part A

The Simon, Haynes, and Jackson partnership presently reports the following accounts. Jackson is

personally insolvent and can contribute only an additional $3,000 to the partnership. Simon is also

insolvent and has no available funds.

LO4

LO1, LO3

Part B

Hough, Luck, and Cummings operate a local accounting firm as a partnership. After working

together for several years, they have decided to liquidate the partnership’s property. The partners have

prepared the following balance sheet:

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,000

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000

Haynes, loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000

Simon, capital (40%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000

Haynes, capital (20%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,000)

Jackson, capital (40%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,000)

Cash . . . . . . . . . . . . . . . . . $ 20,000 Liabilities . . . . . . . . . . . . . . . . . . . $ 40,000

Hough, loan . . . . . . . . . . . . 8,000 Luck, loan . . . . . . . . . . . . . . . . . . 10,000

Noncash assets . . . . . . . . . . 162,000 Hough, capital (50%) . . . . . . . . . 90,000

Luck, capital (40%) . . . . . . . . . . . 30,000

Cummings, capital (10%) . . . . . . 20,000

Total assets . . . . . . . . . . . $190,000 Total liabilities and capital . . . . $190,000

The firm sells the noncash assets for $80,000; it will use $21,000 of this amount to pay liquidation

expenses. All three of these partners are personally insolvent.

Part C

Use the same information as in Part B, but assume that the profits and losses are split 2:4:4 to

Hough, Luck, and Cummings, respectively, and that liquidation expenses are only $6,000.

Part D

Following the liquidation of all noncash assets, the partnership of Redmond, Ledbetter, Watson, and

Sandridge has the following account balances:

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,000

Redmond, loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000

Redmond, capital (20%) . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,000)

Ledbetter, capital (10%) . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,000)

Watson, capital (30%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000

Sandridge, capital (40%) . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000

Redmond is personally insolvent.

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