Maurice Tutor
$15/per page/Negotiable
Installment Liquidation
Nelson, Parker, and Rice are partners who share profits 4:3:3, respectively. Parker decides that it would be more profitable for him to operate as a sole proprietor. Nelson and Rice are in agreement that life would be more rewarding if Parker were to enter into direct competition with them. Nelson and Rice make repeated attempts to acquire Parker"s interest in the partnership. Unable to reach an agreement, the partners mutually agree that their association should be dissolved. A condensed balance sheet before realization of assets shows the following balances:
| Â |
Assets |
Liabilities and Capital |
 |
|
Cash |
$ 5,000 |
Liabilities |
$20,000 |
|
Other Assets |
60,000 |
Nelson, Capital |
20,000 |
| Â | Â |
Parker, Capital |
12,000 |
| Â | Â |
Rice, Capital |
18,000 |
|
Total |
$65,000 |
Total |
$65,000 |
Asset realization is accomplished in four stages as follows:
|
Stage |
Sales Price |
Book Value |
|
1 |
$16,000 |
$12,000 |
|
2 |
12,000 |
10,000 |
|
3 |
10,000 |
20,000 |
|
4 |
2,000 |
18,000 |
The partners prefer that cash be distributed as soon as it is available.
Required:
Prepare a summary in columnar form of the partnership realization and liquidation. You should prepare supporting schedules of safe payments before each cash distribution.
PROBLEM 16-3Installment Liquidation
Hann, Murphey, and Ryan have operated a retail furniture store for the past 30 years. Their business has been unprofitable for several years, since several large discount furniture stores opened in their sales territory. The partners recognize that they will be unable to compete with the larger chain stores and decide that since all the partners are near retirement, they should liquidate their business before it is necessary to declare bankruptcy.