Hardin, Sutton, and Williams have operated a local business as a partnership for several years. All profits and losses have been allocated in a 3:2:1 ratio, respectively. Recently, Williams has undergone personal financial problems, and is insolvent. To satisfy Williams' creditors, the partnership has decided to liquidate.The following balance sheet has been produced: Cash$10,000 Liabilities$80,000Noncash assets 227,000 Hardin, capital 96,000 Sutton, capital 45,000 Williams, capital 16,000Total assets$237,000 Total liabilities and capital$237,000??During the liquidation process, the following transactions take place:?- Noncash assets are sold for $116,000.?- Liquidation expenses of $12,000 are paid. No further expenses are expected.?- Safe capital
distributions are made to the partners.?- Payment is made of all business liabilities.?- Any deficit capital account balances are deemed to be uncollectible.?Compute safe cash payments after the noncash assets have been sold and the liquidation expenses have been paid.
What will be an ideal response?
Safe Cash Payments:
| Hardin | Sutton | Williams | |||||||
| Beginning balances | $ | 96,000 | $ | 45,000 | $ | 16,000 | |||
| $12,000 liquidation expenses | (6,000 | ) | (4,000 | ) | (2,000 | ) | |||
| $111,000 loss on sale of assets | (55,500 | ) | (37,000 | ) | (18,500 | ) | |||
| Subtotals | $ | 34,500 | $ | 4,000 | $ | (4,500 | ) | ||
| Absorption of deficit balance 3:2 | (2,700 | ) | (1,800 | ) | 4,500 | ||||
| Safe Cash Payments $34,000 | $ | 31,800 | $ | 2,200 | $ | 0 | |||
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