Question

This partnership is being liquidated. hendrick and mitchum are each entitled to 40 percent of all profits and losses with the remaining 20 percent going to redding. what is the maximum amount that redding might have to contribute to this partnership because of the deficit capital balance? how should the $20,000 cash that is presently available in excess of liabilities be distributed? if the noncash assets are sold for a total of $50,000, what is the minimum amount of cash that hendrick could receive?

Answer 1

Three people share the profit and losses as follows.Total ratio is 100. Hendrick and Mitch each get 2/5 of the profit or suffer 2/5 of the loss i. e (40/100) as well while redding gets 1/5 i. e (20/100). Redding can contribute no more than one-fifth of the liqudated capital. The$20, 000 in excess liability will be distributed in proportion to their ratios. 2/5 * 20, 000 = $8, 000 each for Hendrick and Mitcherum while redding gets 1/5 * 20, 000 = $4000. If the non cash assest is sold Hendrick would receive 2/5 * 50, 000 = 100000/5 = $20, 000. The minmum hendrick would receive would be $20, 000 + $8, 000 = $28, 000