LO2
Exercise 1
The balance sheet of the Alba, Blick, and Calvo partnership on January 1, 2006 (the date of
partnership dissolution) was as follows:
Cash
$
2,000
Liabilities
$
4,010
Other assets
13,000
Loan from Alba
500
Loan to Calvo
1,000
Alba, capital (20%)
990
Blick, capital(40%)
4,500
Calvo, capital(40%)
6,000
Total assets
$
16,000
Total liab./equity
$
16,000
In January, other assets with a book value of $8,000 were sold for $5,000 in cash.
Required:
Determine how the available cash on January 31, 2006 will be distributed.
Answer:
Alba, Blick, and Calvo Partnership
Partnership Liquidation Schedule
Cash
Non-
Cash
Assets
First
Rank
Debt
20%
Alba
Equity
40%
Blick
Equity
40%
Calvo
Equity
Jan 1 Balance
$
2,000
$
13,000
$
4,010
$
1,490
$
4,500
$
5,000
Sale of assets
5,000
(
8,000
)
(
600
)
(
1,200
)
(
1,200
)
Subtotal
$
7,000
$
5,000
$
4,010
$
890
$
3,300
$
3,800
Safe Payments Schedule
Equity
Equity
890
$
$
3,800
)
Write off Alba 50-50
110
(
)
(
)
Cash distribution to partners
$
1,245
$
1,745
Cash distribution plan on January 31:
First $4,010 goes to priority creditors, and then Blick receives $1,245 and Calvo receives $1,745.