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Partnerships:
Termination and
Liquidation
McGraw-Hill/Irwin
LO 1
LO 2
15-4
LO 3
15-5
15-7
LO 4
Debts owed to
the other
partners.
15-8
LO 5
Predistribution Plan
Used by accountants to guide the distribution of cash
resulting from the liquidation process.
Examine the Balance Sheet below. Assume the income
sharing % is Rubens 50%, Smith 20%, and Trice 30%.
15-9
Predistribution Plan
First, determine the maximum loss that each
partner can absorb. Divide each partners
capital balance by their respective income
sharing %.
15-10
Predistribution Plan
Predistribution Plan
Predistribution Plan
As earlier, compute the maximum absorbable
loss by dividing the capital balances by the
relative income sharing %.
15-13
Predistribution Plan
Predistribution Plan
Predistribution Plan
To inform all parties of the pattern by which
available cash will be disbursed, the predistribution
plan should be formally prepared in a schedule
format prior to beginning liquidation.
15-16