Assignment 1 Week 1

Cash Distribution Plan
Advanced Accounting ACC 407

Assignment 1 Week 1
LO2-16-8 Cash Distribution Plan
Adams, Peters, and Blake share profits and losses for their APB Partnership in a ratio of 2:3:5. When they decide to liquidate, the balance sheet is as follows:
Assets
Liabilities and Equities
Cash $40,000
Liabilities $50,000
Adams, Loan 10,000
Adams, Capital 55,000
Other Assets 200,000
Peters, Capital 75,000

Blake, Capital 70,000
Total Assets $ 250,000
Total Liabilities and Equities $250,000
Liquidation expenses are expected to be negligible. No interest accrues on loans with partners after termination of the business.
Required
Prepare a cash distribution plan for the APB Partnership. APB Partnership
Cash Distribution Plan Loss Absorption Power Capital Accounts
Profit and Loss Percentages
Adams
Peters
Blake
Adams
Peters
Blake

20%
30%
50%
Preliquidation Capital Balance

(55,000)
(75,000)
(70,000)
Loss Absorption Power (Capital Balances/Loss Percentage)
(275,000)
(250,000)
(140,000)

Decrease Highest LAP to Next Highest: Adams (25,000*.20)
25,000

5,000

(250,000)
(250,000)
(140,000)
(50,000)
(75,000)
(70,000)
Decrease LAP’s to Next Highest: Adams (110,000*.20)
110,000

22,000

Peters (110,000*.30)

110,000

33,000

(140,000)
(140,000)
(140,000)
(28,000)
(42,000)
(70,000)

Summary of Cash Distribution Plan

Adams
Peters
Blake
First 50,000to creditors

Next 5,000
100%

Next 55,000
40%
60%

Any Additional
20%
30%
50%