Problem: Sand, Mell, and Rand are partners who share incomes and losses in a 1:4:5 ratio. After lengthy disagreements among the partners and several unprofitable periods, the partners decided to liquidate the partnership. Before the liquidation, the partnership balance sheet showed Cash $10,000, total "other assets," $106,000; total liabilities, $88,000; Sand, Capital, $1,200; Mell, Capital, $11,700; and Rand, Capital, $15,100. The "other assets" were sold for $ 85,000.
Determine the Following:
The gain (or loss) realized on the sale of the assets.
The balances in the partners' capital accounts after the distribution of this gain or loss to the capital accounts.
Assume that if any capital deficits exist, they are not made up. How much cash will each of the partners receive in the final liquidation?
Provide an explanation between 200 and 300 words in length of the requirements for liquidating the partnership. What documents will be needed? How will the money be distributed? What other options might there be in place of liquidation?