Installment liquidation
The partnership of Gary, Henry, Ian, and Joseph is preparing to liquidate. Profit and loss sharing ratios are shown in the summarized balance sheet at December 31, 2011, as follows:
|
Cash |
$200,000 |
Other liabilities |
$100,000 |
|
Inventories |
200,000 |
Gary capital (40%) |
300,000 |
|
Loan to Henry |
20,000 |
Henry capital (30%) |
320,000 |
|
Other assets |
510,000 |
Ian capital (20%) |
100,000 |
|
Joseph capital (10%) |
110,000 |
||
|
$930,000 |
$930,000 |
REQUIRED
1. The partners anticipate an installment liquidation. Prepare a cash distribution plan as of January 1, 2012, that includes a $50,000 contingency fund to help the partners predict when they will be included in cash distributions.
2. During January 2012, the inventories are sold for $100,000, the other liabilities are paid, and $50,000 is set aside for contingencies. The partners agree that loan balances should be closed to capital accounts and that remaining cash (less the contingency fund) should be distributed to partners. How much cash should each partner receive?