Que, Rae, and Sye are in the process of liquidating their partnership. Sye has agreed to accept the inventory, which has a fair value of $60,000, as part of her settlement. A balance sheet and the residual profit and loss sharing percentages are as follow
Cash $ 248,000 Accounts payable $ 180,000
Inventory 100,000 Que, capital (40%) 98,000
Plant assets 280,000 Rae, capital (40%) 175,000
Sye, capital (20%) 175,000
Total assets $ 628,000 Total liab./equity $ 628,000
If the partners then distribute the available cash using a safe payments schedule, Sye will receive
A) $ 41,000 cash.
B) $ 51,000 cash.
C) $107,000 cash.
D) $175,000 cash.
A) 40% 40% 20%
Que Rae Sye
Equities $98,000 $175,000 $175,000
Distribute inventory to Sye (60,000)
and:
recognize $40,000 loss (16,000) (16,000) (8,000)
Possible losses on plant (112,000) (112,000) (56,000)
Subtotal $(30,000) $47,000 $51,000
Eliminate Que's debit
balance to Rae & Sye 30,000 (20,000) (10,000)
Balance $ 0 $ 27,000 $ 41,000
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