Question

The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation: Cash $ 100,000 Liabilities $ 40,000 Noncash assets 210,000 Keaton, Capital 90,000 Lewis, Capital 60,000 Meador, Capital 120,000 Total $ 310,000 Total $ 310,000 Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Assume that noncash assets were sold for $58,000 and liquidation expenses in the amount of $10,000 were incurred. If Lewis was personally insolvent and could not contribute any assets to the partnership, and Keaton and Meador were both solvent, what amount of cash would Keaton receive from the distribution of partnership assets

Answer 1

Answer:

Keaton will receive 56,000

Explanation:

cash 100,000 - liab 40,000 = 60,000

non cash assets                      58,000

liquidation expense                (10,000)

Total                                       108,000

Loss on sale of noncash assets:

210,000 - 58,000 = 152,000

Liquidation expens   10,000

  Total loss to be distribute       162,000

Keaton  20% = 32,400

Lewis:   40% = 64,800

Meador 40% = 64,800

Keaton 90,000 - 32,400   = 57,600

Lewis    60,000 - 64,800   =  -4,800

Meador 120,000 - 64,800 = 55,200

If Lewis is insolvent, then it will distribute to Meador and Keaton:

2:0:4

4,800  x 2/6 = 1,600

4,800 x 4/6  = 3,200

kearon 57,600 - 1,600 =    56,000

Meador 55,200 - 3,200 = 52,000

Total                               108,000

The total capital account matches the cash balance of 108,000

Our calculation are correct