PROBLEM 1
Insolvent Solvent Solvent Insolvent
3 2 1 4
Cash NCA Liabilities Jaby Capital Macdo Capital Chewking Capital Mang Inasar Capital
Beg, Balance 100,000.00 300,000.00 100,000.00 25,000.00 110,000.00 100,000.00 65,000.00
Sale of NCA 150,000.00 (300,000.00) (45,000.00) (30,000.00) (15,000.00) (60,000.00)
250,000.00 - 100,000.00 (20,000.00) 80,000.00 85,000.00 5,000.00
Payment of Liabilities (100,000.00) (100,000.00)
Absorption of Insolvent partners (Jaby) 20,000.00 (5,714.29) (2,857.14) (11,428.57)
Absorption of Insolvent partners (Mang Inasar) (4,285.71) (2,142.86) 6,428.57
Payment to Partners 150,000.00 - - - 70,000.00 80,000.00 -
3. 1. 2.
PROBLEM 2
55% 20% 25% Selling Price 10,000.00
Larry Capital Masha Capital Natalie Capital Historical Cost 25,000.00
Beg. Balance 108,000.00 62,000.00 56,000.00 Accumulated Depn. 18,000.00
sales of NCA 1,650.00 600.00 750.00 Book Value 7,000.00
109,650.00 62,600.00 56,750.00 Gain on sale of NCA 3,000.00
4.
PROBLEM 3
30% 45% 25%
Liz Capital Bob Capital Alex Capital Selling Price 50,000.00
Beg, Balance 20,000.00 30,000.00 15,000.00 Book value 90,000.00
Sale of NCA (12,000.00) (18,000.00) (10,000.00) Loss on sale of NCA (40,000.00)
Liquidation Expenses (9,000.00) (13,500.00) (7,500.00)
(1,000.00) (1,500.00) (2,500.00)
5. 6. 7.
PROBLEM 4
Donald Capital Marion Capital Jeff Capital
Capital Balance 147,000.00 260,000.00 285,000.00
Loss absorption capacity is equal to the total interest
Loan 28,000.00 - (15,000.00) of the partner which includes the capital and loans
Interest 175,000.00 260,000.00 270,000.00 of the partner divide it by the P/L Ratio
35% 25%
500,000.00 1,040,000.00
8. 9.
PROBLEM 6
3 2 5
Cash NCA Liabilities Abrams, Capital Bartle, Capital Creighton, Capital
Beg, Balance 16,000.00 434,000.00 150,000.00 80,000.00 90,000.00 130,000.00
Sale of NCA 134,000.00 (434,000.00) (90,000.00) (60,000.00) (150,000.00)
Liquidation Expenses (12,000.00) (3,600.00) (2,400.00) (6,000.00)
138,000.00 - 150,000.00 (13,600.00) 27,600.00 (26,000.00)
11. 11.
PROBLEM 7
Insolvent Solvent Solvent
2 4 4
Cash NCA Liabilities Keaton Capital Lewis Capital Meadow Capital
Beg, Balance 10,000.00 300,000.00 130,000.00 60,000.00 40,000.00 80,000.00
Sale of NCA 180,000.00 (300,000.00) (24,000.00) (48,000.00) (48,000.00)
Liquidation expenses (10,000.00) (2,000.00) (4,000.00) (4,000.00)
Payment of Liabilities (130,000.00) (130,000.00)
50,000.00 - - 34,000.00 (12,000.00) 28,000.00
Additional Investment 12,000.00 12,000.00
62,000.00 - - 34,000.00 - 28,000.00
12.
Personal Asset 8,000.00
Personal Liabilities 60,000.00
Personal Deficit of Keaton (52,000.00)
PROBLEM 8
30% 45% 25%
Cash Inventory Loan to Jody Loan to Lark Plant Assets Accounts Payabl Notes Payable Jody, Capital Kane, Capital Lark, Capital
Beg. Balance 54,000.00 60,000.00 10,000.00 16,000.00 110,000.00 28,000.00 60,000.00 32,000.00 90,000.00 40,000.00
Sale of Inventory 54,000.00 (60,000.00) (1,800.00) (2,700.00) (1,500.00)
Sale of Plant Asset 60,000.00 (50,000.00) 3,000.00 4,500.00 2,500.00
Payment of Liabilities (88,000.00) (28,000.00) (60,000.00)
Right of Offset (10,000.00) (16,000.00) (10,000.00) (16,000.00)
80,000.00 - - - 60,000.00 - - 23,200.00 91,800.00 25,000.00
Possible Loss (60,000.00) (18,000.00) (27,000.00) (15,000.00)
80,000.00 - - - - - - 5,200.00 64,800.00 10,000.00
13.
PROBLEM 9
50% 30% 20%
Cash NCA Liabilities Mick Capital Keith Capital Charlie Capital
Beg. Balance 200,000.00 300,000.00 150,000.00 100,000.00 175,000.00 75,000.00
Payment of Liabilities (150,000.00) (150,000.00)
Payment to Partners (25,000.00) - (25,000.00) -
Balance 25,000.00 300,000.00 - 100,000.00 150,000.00 75,000.00
Schedule of Safe Payment
50% 30% 20%
Cash NCA Liabilities Mick Capital Keith Capital Charlie Capital
50,000.00 300,000.00 - 100,000.00 175,000.00 75,000.00
Safety Measure #1 (25,000.00) (300,000.00) (162,500.00) (97,500.00) (65,000.00)
(62,500.00) 77,500.00 10,000.00
Safety Measure #2 62,500.00 (37,500.00) (25,000.00)
- 40,000.00 (15,000.00)
(15,000.00) 15,000.00
- 25,000.00 - 14.
Safety Measure #1 pertains to the scenario when NCA will not be sold and the contingency
fund is for distribution already.
Safety Measure #2 pertains to the scenario when partner is insolvent and cannot invest
additional cash for the capital deficiency.
PROBLEM 10
Cash Priority Program
4 4 2
Homer Capital Marge Capital Bart Capital Homer Share Marge Share Bart Share Total
Total Interest 180,000.00 210,000.00 240,000.00
4/10 4/10 2/10
450,000.00 525,000.00 1,200,000.00
Priority #1 675,000.00 135,000.00 135,000.00
450,000.00 525,000.00 525,000.00
Priority #2 75,000.00 75,000.00 30,000.00 15,000.00 45,000.00
450,000.00 450,000.00 450,000.00 - 30,000.00 150,000.00 180,000.00
Priority #3 4/10 4/10 2/10
4 4 2
Cash NCA Liabilities Homer Capital Marge Capital Bart Capital
Beg. Balance 150,000.00 600,000.00 120,000.00 180,000.00 210,000.00 240,000.00
Sale of NCA 285,000.00 (360,000.00) (30,000.00) (30,000.00) (15,000.00)
Payment of Liabilities (120,000.00) (120,000.00)
(315,000.00) (54,000.00) (84,000.00) (177,000.00)
Bal. - 240,000.00 - 96,000.00 96,000.00 48,000.00
Using Schedule of Safe Payment
4 4 2
Cash NCA Liabilities Homer Capital Marge Capital Bart Capital
315,000.00 240,000.00 - 150,000.00 180,000.00 225,000.00
Safety Measure #1 - (240,000.00) (96,000.00) (96,000.00) (48,000.00)
54,000.00 84,000.00 177,000.00 15.
Using Cash Priority Program
Homer Share Marge Share Bart Share
For Distribution 315,000.00
Prriority #1 135,000.00 - - 135,000.00
180,000.00 - - 135,000.00
Priority #2 45,000.00 - 30,000.00 15,000.00
135,000.00 - 30,000.00 150,000.00
Priority #3 135,000.00 54,000.00 54,000.00 27,000.00
Share in the distribut - 54,000.00 84,000.00 177,000.00
PROBLEM 11 PROBLEM 12
Donald Capital Marion Capital Jeff Capital B I G
Capital Balance 147,000.00 260,000.00 285,000.00 Capital Balance 210,000.00 240,000.00 40,000.00
Loan 28,000.00 - (15,000.00) Loan 40,000.00 (100,000.00) 80,000.00
Interest 175,000.00 260,000.00 270,000.00 Interest 250,000.00 140,000.00 120,000.00
35% 25% 40% 50% 20% 30%
500,000.00 1,040,000.00 675,000.00 500,000.00 700,000.00 400,000.00
16. 17.
2nd 1st 3rd
18.
PROBLEM 13
Cash Priority Program
30% 25% 45%
Harold Sheldon Fred Harold Share Sheldon Share Fred Share Total
Total Interest 120,000.00 75,000.00 171,000.00
30% 25% 45%
400,000.00 300,000.00 380,000.00
Priority #1 20,000.00 6,000.00 - - 6,000.00
380,000.00 300,000.00 380,000.00
Priority #2 80,000.00 80,000.00 24,000.00 - 36,000.00 60,000.00
300,000.00 300,000.00 300,000.00 30,000.00 - 36,000.00 66,000.00
Priority #3 30% 25% 45%
Homer Share Marge Share Bart Share
For Distribution 60,000.00
Prriority #1 6,000.00 6,000.00 -
54,000.00 6,000.00 - -
Priority #2 54,000.00 21,600.00 - 32,400.00
- 27,600.00 - 32,400.00
Priority #3 - - - -
Share in the distribut - 27,600.00 - 32,400.00
19. 20. 21.
PROBLEM 14
40% 30% 30%
Cash NCA Liabilities Hara Capital Ives Capital Jack Capital
Beg. Balance 400,000.00 200,000.00 200,000.00 135,000.00 216,000.00 49,000.00
Payment of Liabilities (200,000.00) (200,000.00)
Balance 200,000.00 200,000.00 - 135,000.00 216,000.00 49,000.00
Payment to Partners (190,000.00) (43,000.00) (147,000.00) -
10,000.00 200,000.00 - 92,000.00 69,000.00 49,000.00
Using Schedule of Safe Payment 40% 30% 30%
Cash NCA Liabilities Hara Capital Ives Capital Jack Capital
200,000.00 200,000.00 - 135,000.00 216,000.00 49,000.00
Safety Measure #1 (10,000.00) (200,000.00) (84,000.00) (63,000.00) (63,000.00)
51,000.00 153,000.00 (14,000.00)
Safety Measure #2 (8,000.00) (6,000.00) 14,000.00
190,000.00 - 43,000.00 147,000.00 -
22.
