LMNO Partnership has operated for several years. Currently, the partnership has the following account balances: Assets Liabilities Cash $ 100,000 Notes Payable $50,000 Land 200,000 Equity Larry, Capital $60,000 Marge, Capital 70,000 Nancy, Capital 80,000 Owen, Capital 40,000 Larry, Marge, Nancy, and Owen share equally in profits and losses. LMNO Partnership has decided to dissolve their operation. If LMNO is able to sell the land for $250,000 and uses the proceeds to pay off the Notes Payable, how much will Larry receive in return for his partnership interest

LMNO Partnership

Larry will receive $72,500 in return for his partnership interest.

Explanation:

a) Data and Calculations:

Assets Liabilities

Cash $ 100,000

Land 200,000

Total assets = $300,000

Notes Payable $50,000

Equity:

Larry, Capital $60,000

Marge, Capital 70,000

Nancy, Capital 80,000

Owen, Capital 40,000

Total equity = $250,000

Total equity and liabilities = $300,000

Profit and loss sharing = equally (25% each)

Cash balance after the sale of land and settlement of debt:

Cash balance                                         $100,000

Sale of land                                           $250,000

Settlement of notes payable                   (50,000)

Balance to be distributed to partners $300,000

Statement of capital liquidation:

                                      Larry       Marge      Nancy        Owen        Total

Capital accounts      $60,000   $70,000  $80,000     $40,000   $250,000

Profit from land sale   12,500      12,500     12,500        12,500        50,000

Capital balances      $72,500   $82,500  $92,500    $52,500   $300,000

Cash distribution    ($72,500) ($82,500) ($92,500) ($52,500) ($300,000)

Capital balances                $0             $0             $0             $0               $0

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