The following condensed balance sheet is for the partnership of Hardwick, Saunders, and Ferris, who share profits and losses in the ratio of 4:3:3, respectively: Cash $90,000 Accounts payable $210,000
Other assets 820,000 Ferris, loan 40,000
Hardwick, loan 30,000 Hardwick, capital 300,000
Saunders, capital 200,000
Ferris, capital 190,000
Total assets $940,000Total liabilities and capital $940,000
The partners decide to liquidate the partnership. Forty percent of the other assets are sold for $200,000.
Prepare a proposed schedule of liquidation at this point in time.

Hardwick, Saunders, and Ferris Partnership

Proposed Schedule of Liquidation:

Total Cash Realized =  $772,000

Accounts payable         (210,000)

Available cash =          $562,000

Ferris, loan        40,000

Hardwick, loan  30,000 (70,000)

After loans                  $492,000

Repayment of capital:

Hardwick, capital  = $220,800

Saunders, capital =  $140,600

Ferris, capital =        $130,600

Explanation:

Profits and losses sharing ratios:

Hardwick = 4

Saunders = 3

Ferris = 3

Condensed Balance Sheet:

Cash                  $90,000    Accounts payable               $210,000

Other assets     820,000    Ferris, loan                              40,000

                                            Hardwick, loan                        30,000

                                            Hardwick, capital                  300,000

                                            Saunders, capital                 200,000

                                            Ferris, capital                        190,000

Total assets   $940,000    Total liabilities and capital $940,000

Realization of Assets:

Cash                  $90,000

Other assets     482,000 (60% of $820,000)

Other assets    200,000 (40% of $820,000)

Total cash realized = $772,000

Total capital = $690,000

Total cash available to settle capital = $492,000

Shortfall in capital = $198,000

This is shared according to their loss sharing ratio:

Hardwick = $198,000 * 40% = $79,200

Saunders = $198,000 * 30% = $59,400

Ferris = $198,000 * 30% = $59,400

The shortfall is deducted from their capital accounts:

Hardwick, capital $220,800 (300,000 - 79,200)

Saunders, capital $140,600 (200,000 - 59,400)

Ferris, capital $130,600 (190,000 - 59,400)

Balance shared = $492,000

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