Before beginning liquidation activities, the partnership agrees that Targaryen must eliminate her deficit balance. Assuming the noncash assets have zero value, what is the maximum amount Targaryen must contribute to the partnership to eliminate the deficit balance in her capital account? Assuming maximum losses, prepare a formal Statement of Liquidation for the partnership. Based on your schedule of liquidation, how much will be distributed to each partner upon full liquidation?
After 25 years of operations, the Starke, Lannister, and Targaryen
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Starke, Lannister, and Targaryen, Partners |
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Balance Sheet |
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as of 12/31/20x1 |
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Assets |
Liabilities and Partners’ Capital |
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Cash |
$80,000 |
Liabilities |
$47,000 |
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Noncash assets |
205,000 |
Starke, Capital |
138,000 |
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Lannister, Capital |
119,500 |
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Targaryen, Capital |
(19,500) |
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Total assets |
$285,000 |
Total Liabilities and Capital |
$285,000 |
In accordance with the Articles of Partnership, the partners agreed to share
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Starke, Capital |
30% |
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Lannister, Capital |
40% |
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Targaryen, Capital |
30% |
The partnership estimates liquidation expenses of $10,000.
Required
- Before beginning liquidation activities, the partnership agrees that Targaryen must eliminate her deficit balance. Assuming the noncash assets have zero value, what is the maximum amount Targaryen must contribute to the partnership to eliminate the deficit balance in her capital account?
- Assuming maximum losses, prepare a formal Statement of Liquidation for the partnership.
- Based on your schedule of liquidation, how much will be distributed to each partner upon full liquidation?
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