Question

DHG tilt is now 1/1/2024, sadly the "Honesty Rules" partnership is coming to an end since one of them was found out to be dishonest! 2 Since they are terminating the partnership, they will no longer get a salary nor will they get interest on their capital account. On 1/1/2024 the balance sheet for "Honesty Rules"s 400,000 cash a/r land building net equipment net 40,000 200,000 400,000 $00,000 accounts payable Trump capital Clinton capital Mueller capita 500,000 100,000 640,000 500,000 total assets total lia equity 1,640,000 On 1/1/2024 what (if any) safe payments can each partner take? On 1/28/2024 Honesty Rules sold the land for $300,000 cash. After this sale of land what (if any) safe payments can each partner take? Assume no partner has taken any safe payments yet 5 8 9 0

Answer 1

Part 1 if all the partners are solvent

Honestly rules Partnership Balance Sheet as on 01/01/2024
Assets	Amount	Liabilities	Amount
Cash	40,000	A/P	400,000
A/R	200,000	Capital
Land	400,000	Trump	500,000
Building net	500,000	Clinton	100,000
Equipment net	500,000	Mueller	640,000
Total Assets	1,640,000	Total Liabilities	1,640,000

Reliasation account

Debit	Amount	Credit	Amount
To Cash Acc	40,000	By A/P Acc	400,000
To A/R Acc	200,000	By Cash Acc
To Land Acc	400,000	A/R	150,000
To Building net Acc	500,000	Equipment	300,000
To Equipment net Acc	500,000	Building	100,000
To Cash Acc		By Capital loss Acc	1,090,000
A/P	400,000	Trump	439,516
		Clinton	87,903
		Mueller	562,581
	2,040,000		2,040,000

Trump Capital Account
Debit	Amount	Credit	Amount
To loss on Reliasation Acc	439,516	By Capital in partnership firm	500000
To Cash Acc	60,484
	500,000		500,000
Clinton Capital Account
Debit	Amount	Credit	Amount
To loss on Reliasation Acc	87,903	By Capital in partnership firm	100000
To Cash Acc	12,097
	100,000		100,000
Muller Capital Account
Debit	Amount	Credit	Amount
To loss on Reliasation Acc	562,581	By Capital in partnership firm	640000
To Cash Acc	77,419
	640,000		640,000

Cash Account
Debit	Amount	Credit	Amount
To A/R Acc	150,000	By Realisation Acc	40,000
To Equipment Acc	300,000	By A/P Acc	400000
To Building Acc	100,000	By Trump Capital Account	60,484
To cash on hand Acc	40,000	By Clinton Capital Account	12,097
		By Muller Capital Account	77,419
	590,000		590,000

Loss on dissolution of partnership firm should be beared by all partners in their capital sharing ratio on dissolution balance sheet date

Part 2 all the partners are insolvent

If all the partners are insolvent at the time of dissolution loss on realisation should be born by all partners in their profit sharing ratio.

if assumed profit sharing ratio is as capital ratio then the solution is same as above