Question

A partnership has the following account balances: Cash, $85,000; Other Assets, $615,000; Liabilities, $369,000; Nixon (50 percent of profits and losses), $155,000; Cleveland (30 percent), $105,000; Pierce (20 percent), $71,000. The company liquidates, and $15,500 becomes available to the partners. Who gets the $15,500? Determine how much of this amount should be distributed to each partner. (Do not round intermediate calculations.)

Answer 1

Answer:

Nixon = (155,000/331,000)*15,500 = 7,258.31

Cleveland = (105,000/331,000)*15,500 = 4,916.92

Pierce = (71,000/331,000)*15,500 = 3,324.72

TOTAL DISTRIBUTION: 15,500.00

Explanation:

A cash liquidation distribution or liquidating dividend is a distribution of cash or other assets to shareholders when a business is liquidated. This distribution represents the amount of capital returned to the investor or business owner when a corporation is partially or fully liquidated. This dividend is paid out after all creditor and lender obligations have been settled, so the dividend payout should be one of the last actions taken before the business is closed.  

The dividends are returned to investors per the capital structure of the business, not per profits and losses participation.