Question

Perry, Quincy, and Renquist had shared profits and losses in a ratio of 2:4:4. Liquidation expenses were expected to be $8,000. Assume that Quincy was insolvent and could not contribute assets to cover any deficit in her capital account. For what amount must the noncash assets have been sold, so that Renquist would have received some cash from the liquidation?

Answer 1

Answer:

Any amount above $88,000

Explanation:

$ 95,00

Cash                              $90,000

liquidation expenses    ($8,000)

Liabilities                    ($170,000)

net                               ($88,000)

The partnerships needs to sell its noncash assets for at least $88,000 to cover its liquidation costs and liabilities. Any additional cash received through the sale of the noncash assets should be distributed in the liquidation ratio 2:4:4.

E.g. they sell the noncash assets for $90,000, they will distribute $2,000 (=$90,000 - $88,000):

• Perry x 20% = $400
• Quincy x 40% = $800
• Renquist x 40% = $800