The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $3,000. The noncash assets were sold for $200,000.
Which partner(s) would be required to contribute assets to the partnership to cover a deficit in his or her capital account? Calculate the safe payments for the remaining partner (s) i.e. those with non-deficit balances.
Homework Answers
liquidation:
When the company is in the condition when it is difficult to run the business and the companies want to quit, then it files for bankruptcy. The one reason for the bankruptcy is when the company has more liabilities than assets.
Answer and Explanation:
Loss on liquidation = $200000 - $3000 - $450000 = $253000(Loss)
Share in losses:
Abrams = $253,000 x 3/10 = $75900
Bartle =$ 253,000 x 2/10 = $50600
Creighton = $253,000 x 5/10 = $126500
Creighton share in loss is more than his capital.Thus Creighton will contribute to cover his deficit.
Creighton amount to contribute = $126500 - $ 90000 = $36500
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