Partners X, Y and Z have capital balances of $80, 000, $180,000 and $60,000 resp
ID: 2415906 • Letter: P
Question
Partners X, Y and Z have capital balances of $80, 000, $180,000 and $60,000 respectively. Immediately prior to liquidation. Total remaining assets have a book value of $320,000 and assume liabilities have been paid. There is one remaining asset with a fair market value of $70,000. All three partners agree to share profit and loss equally. Z wishes to take the asset with him and start a new business and would accept $70,000 in cash the remaining partners agree this would be fair. How much cash in addition to the asset would first be distributed to Z before any of the other partners receive anything? a. $100,000 b. $240,000 c. $30,000 d. $50,000
Explanation / Answer
The remainning assets of $320000 would be distributed among all the three partners on the basis of their capital ratios:
X, Y and Z would have got $80, 000, $180,000 and $60,000 respectively.
Z has already got cash of $70000 and now $30000 would first be distributed to him before any of the other partners receive anything