AccountingMake it ASAPLump-Sum LiquidationThree university students, Cho, Kenney, and Martinez, operated a successful business, renting furniture and appliances to students residing in dormitories and off-campus apartments. The three are now graduating and wish to sell the business before beginning their respective careers. They shared profits in a 2:1:1 ratio. The partnership’s current balance sheet is as follows:Cash$6,000 Accounts payable$60,000Loan receivable—Cho25,000 Loan payable—Kenney10,000Other assets158,000 Capital—Cho30,000 Capital—Kenney30,000 Capital—Martinez59,000Total assets$189,000 Total liabilities and capital$189,000 Another student group, organized as an LLC, wants to buy the business. The LLC's offer of $117,000 for the partnership's other assets is accepted. After receipt of the $117,000, the liabilities are paid and the partnership is liquidated.RequiredHow much does each partner receive? Assume that if one of the partners forms a capital deficit, they are insolvent and will be unable to pay the difference.

We need to determine the cash earned after the spill from our partners. Hence the properties of the…

Answered: Lump-Sum Liquidation Three university…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter11: Stockholders' Equity

Section: Chapter Questions

Problem 11.11AP

See similar textbooks

Accounting

Make it ASAP

Lump-Sum Liquidation

Three university students, Cho, Kenney, and Martinez, operated a successful business, renting furniture and appliances to students residing in dormitories and off-campus apartments. The three are now graduating and wish to sell the business before beginning their respective careers. They shared profits in a 2:1:1 ratio. The partnership’s current balance sheet is as follows:

Cash	$6,000	Accounts payable	$60,000
Loan receivable—Cho	25,000	Loan payable—Kenney	10,000
Other assets	158,000	Capital—Cho	30,000
		Capital—Kenney	30,000
		Capital—Martinez	59,000
Total assets	$189,000	Total liabilities and capital	$189,000

Another student group, organized as an LLC, wants to buy the business. The LLC's offer of $117,000 for the partnership's other assets is accepted. After receipt of the $117,000, the liabilities are paid and the partnership is liquidated.

Required

How much does each partner receive? Assume that if one of the partners forms a capital deficit, they are insolvent and will be unable to pay the difference.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions