Financial Accounting

Partnerships (Piecemeal Liquidation)

Solution to the Example (Piecemeal Liquidation)
3 2
PPE Creditors Bank Goodwill Capital Capital
Bruce Clark
Balance 20000 -5000 2000 1800 11000 1000
close off current accounts 1000 -200
close goodwill -1800 -900 -600
20000 -5000 2000 0 11100 200
pay off the creditors 2000 -2000
20000 -3000 0 11100 200
Stage 1
-5000 5000
15000 -3000 5000 11100 200
pay off the creditors 3000 -3000

15000 0 2000 11100 200

There is existing Assets (still needing to be sold) AND

separate working for LACM.... MAX ANTICIPATED LOSS....
max loss - LACM.... -15000 -7500 -5000
3600 -4800
-3600 4800
0 0

Balances at Stage 1 15000 0 2000 0 11100 200

-2000
15000 0 0 0 11100 200
Stage 2
second liquidation -5000 4000
allocation of a 1000 loss to partners 500 333

10000 0 4000 0 10600 -133

LACM..... Calc....
max loss -10000 -5000 -3333
5600 -3467
-2600 3467
3000 0
Balance 10000 0 4000 0 10600 -133
Second interim repayment -4000 -3000
10000 0 0 0 7600 -133
Stage 3
sale of remaining PPE -10000 12000
profit to be allocated to partners 1000 667

0 0 1E+04 0 8600 533

LACM = 1) is there cash available for distribution... Y
2) Are there any remaining assets that still need to be
Final repayment of capital -12000 -8600 -533
0 0 0 0 0 0
 1
Capital Current Current Current
Diana Bruce Clark Diana
5000 1000 -200 1000 OE = 18800 A - L 18800
1000 -1000 200 -1000
-300
5700 0 0 0 OE = 17000 A - L 17000

5700

5700

5700 OE = 17000 A - L 17000

(still needing to be sold) AND there's cash available for distribution...... LACM!!!!!
MAX ANTICIPATED LOSS....
-2500
3200
-1200
2000

5700 0 0 0
-2000
3700 0 0 0 OE = 15000 A - L 15000

167

3533 OE = 14000 A - L 14000

-1667
1867
-867
1000
 3533 0 0 0
-1000
2533 0 0 0 OE = 10000 A - L 10000

333

2867 0 0 0
h available for distribution... YES
ning assets that still need to be sold.... NO
-2867
0 0 0 0