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The following balance sheet is for a local partnership in which the partners have become very
unhappy with each other.
Cash $ 50,000 Liabilities $ 40,000
Land 180,000 Adams, capital 114,000
Building 170,000 Baker, capital 42,000
Carvil, capital 80,000
Dobbs, capital 124,000
Total assets $ 400,000 Total liabilities and capital $ 400,000
To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this
information, answer the following questions. Each question should be viewed as an independent
situation related to the partnership’s liquidation.
a. The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If
profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 2:3:3:2 basis,
respectively, how will the $10,000 be divided?
b. The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If
profits and losses are allocated on a 2:2:3:3 basis, respectively, how will the $10,000 be
divided?
c. The building is immediately sold for $95,000 to give total cash of $145,000. The liabilities are
then paid, leaving a cash balance of $105,000. This cash is to be distributed to the partners.
How much of this money will each partner receive if profits and losses are allocated to Adams,
Baker, Carvil, and Dobbs on a 1:3:3:3 basis, respectively? (Do not round intermediate
calculations.)
d. Assume that profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 1:3:4:2
basis, respectively. How much money must the firm receive from selling the land and building to
ensure that Carvil receives a portion? (Do not round intermediate calculations.)
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