The partnership of Marks, Norris, Smith, and Savannah has now operated for several years. Last year, Marks and Norris reduced their interests in the business and the partnership agreement was amended to reapportion capital interests. Since then, recent market declines have caused several partners to undergo personal financial problems. As a result, the partners have decided to terminate operations and liquidate the business. The following balance sheet is drawn up as a guideline for this process:
|
Cash
|
$ 65,000
|
Liabilities
|
$ 54,000
|
|
Accounts receivable
|
132,000
|
Smith, loan
|
85,000
|
|
Inventory
|
151,000
|
Marks, capital (30%)
|
195,000
|
|
Land
|
110,000
|
Norris, capital (10%)
|
138,000
|
|
Building and equipment (net)
|
193,000
|
Smith, capital (20%)
|
99,000
|
| |
|
Savannah, capital (40%)
|
80,000
|
|
Total assets
|
$651,000
|
Total liabilities and capital
|
$651,000
|
When the liquidation commenced, expenses of $20,000 were anticipated as being necessary to dispose of all property. Prepare a predistribution plan for the partnership.