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12 February, 10:51

The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation: Cash $ 100,000 Liabilities $ 40,000 Noncash assets 210,000 Keaton, Capital 90,000 Lewis, Capital 60,000 Meador, Capital 120,000 Total $ 310,000 Total $ 310,000 Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Assume that noncash assets were sold for $58,000 and liquidation expenses in the amount of $10,000 were incurred. If Lewis was personally insolvent and could not contribute any assets to the partnership, and Keaton and Meador were both solvent, what amount of cash would Keaton receive from the distribution of partnership assets

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  1. 12 February, 11:13
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    Keaton will receive 56,000

    Explanation:

    cash 100,000 - liab 40,000 = 60,000

    non cash assets 58,000

    liquidation expense (10,000)

    Total 108,000

    Loss on sale of noncash assets:

    210,000 - 58,000 = 152,000

    Liquidation expens 10,000

    Total loss to be distribute 162,000

    Keaton 20% = 32,400

    Lewis: 40% = 64,800

    Meador 40% = 64,800

    Keaton 90,000 - 32,400 = 57,600

    Lewis 60,000 - 64,800 = - 4,800

    Meador 120,000 - 64,800 = 55,200

    If Lewis is insolvent, then it will distribute to Meador and Keaton:

    2:0:4

    4,800 x 2/6 = 1,600

    4,800 x 4/6 = 3,200

    kearon 57,600 - 1,600 = 56,000

    Meador 55,200 - 3,200 = 52,000

    Total 108,000

    The total capital account matches the cash balance of 108,000

    Our calculation are correct
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