Question

Partners Dennis and Lilly have decided to liquidate their business. The following information is available:

Answer 1

Answer:

Partners Dennis and Lilly have decided to liquidate their business. The following information is available:

Cash $100,000 Accounts Payable $100,000

Inventory $200,000 Dennis, Capital $120,000

Lilly, Capital $80,000

$300,000 $300,000

Dennis and Lilly share profits and losses in a 3:2 ratio. During the first month of liquidation, half the inventory is sold for $60,000, and $60,000 of the accounts payable is paid. During the second month, the rest of the inventory is sold for $45,000, and the remaining accounts payable are paid. Cash is distributed at the end of each month, and the liquidation is completed at the end of the second month.

1. Using a safe payments schedule, how much cash will be distributed to Dennis at the end of the first month?

a. $36,000

b. $64,000

c. $60,000

d. $24,000

2. Using a safe payments schedule, how much cash will be distributed to Lilly at the end of the first month?

a. $40,000

b. $24,000

c. $64,000

d. $16,000