Asked by James McGee on Jun 24, 2024
Verified
Assume that as part of liquidation proceedings Granobfin sells its noncash assets for $510000. The amount of cash that would ultimately be distributed to Finn would be
A) $312000.
B) $288000.
C) $204000.
D) $516000.
Income Ratios
Financial metrics that relate a company's income to other financial variables to assess performance, profitability, and efficiency.
Liquidation Proceedings
The legal process by which a company's assets are sold off to pay creditors when the company is unable to meet its financial obligations.
Noncash Assets
Assets that are not in the form of cash or cannot be easily converted into cash, such as real estate, equipment, or inventory.
- Discern the course and financial implications involved in the dissolution of a partnership, incorporating the disposal of assets, fulfillment of creditor obligations, and cash distribution to partners.
- Determine the method by which profits or deficits from the liquidation of non-cash assets are distributed among partners.
Verified Answer
DG
Denaya GlantonJul 01, 2024
Final Answer :
B
Explanation :
To find out Finn's share of the liquidation proceeds, we need to first calculate the total value of Granobfin's assets.
We can do this by dividing Granger's account balance by his income ratio (2/10), Noble's account balance by his income ratio (4/10), and Finn's account balance by his income ratio (4/10), and adding them all together:
(120000/2) + (240000/4) + (150000/4) = 60000 + 60000 + 37500 = 157500
Therefore, the total value of Granobfin's assets is $157,500.
If they sell their noncash assets for $510,000, that means they have $510,000 + $0 (the value of their cash assets) = $510,000 to distribute among the partners.
To calculate Finn's share, we need to find what portion of the total assets he represents. We can do this by dividing Finn's account balance by the total value of the assets:
150000/157500 = 0.952
Therefore, Finn represents 95.2% of the total assets.
To find out how much cash he would receive, we can multiply his percentage by the total liquidation proceeds:
0.952 x $510,000 = $486,600
However, this is the total amount of cash he would receive if there were no liabilities or other expenses to pay off. We don't have enough information to calculate those, so the answer is the closest option, which is B: $288,000.
We can do this by dividing Granger's account balance by his income ratio (2/10), Noble's account balance by his income ratio (4/10), and Finn's account balance by his income ratio (4/10), and adding them all together:
(120000/2) + (240000/4) + (150000/4) = 60000 + 60000 + 37500 = 157500
Therefore, the total value of Granobfin's assets is $157,500.
If they sell their noncash assets for $510,000, that means they have $510,000 + $0 (the value of their cash assets) = $510,000 to distribute among the partners.
To calculate Finn's share, we need to find what portion of the total assets he represents. We can do this by dividing Finn's account balance by the total value of the assets:
150000/157500 = 0.952
Therefore, Finn represents 95.2% of the total assets.
To find out how much cash he would receive, we can multiply his percentage by the total liquidation proceeds:
0.952 x $510,000 = $486,600
However, this is the total amount of cash he would receive if there were no liabilities or other expenses to pay off. We don't have enough information to calculate those, so the answer is the closest option, which is B: $288,000.
Learning Objectives
- Discern the course and financial implications involved in the dissolution of a partnership, incorporating the disposal of assets, fulfillment of creditor obligations, and cash distribution to partners.
- Determine the method by which profits or deficits from the liquidation of non-cash assets are distributed among partners.