Shrek, Donkey, and Fiona Are Partners in SDF and Share

question 36

Multiple Choice

Shrek, Donkey, and Fiona are partners in SDF and share profits and losses in the ratio of 5:3:2, respectively.The partnership has cash of $10,000 and noncash assets of $90,000 when they decide to liquidate.Liabilities at the time of liquidation are $40,000, including a note payable to Fiona of $5,000.The partner capital accounts are Shrek $40,000, Donkey $ 15,000 and Fiona $5,000.The non-cash assets of the partnership were sold for $26,000.The liabilities other than the note payable to Fiona are paid.Fiona is personally insolvent.Shrek and Donkey and not insolvent.Under the circumstances:

• A)Shrek will receive a distribution in liquidation of $8,000.
• B)Fiona will be required to contribute $2,800 to the partnership.
• C)Shrek will receive a distribution in liquidation of $6,250.
• D)Donkey will be required to contribute $4,200 to the partnership.

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Definitions:

Open Market

A market with no barriers to free market activity, where any buyer or seller can trade freely.

Buying and Selling Activity

Transactions involving the purchase and sale of goods and services, analyzed to assess a company's operational performance.

Controlling Interest

A significant shareholding in a corporation that provides the shareholder with the ability to influence or control decision-making processes.

Carrying Value

The recorded net value of an asset or liability on a company's balance sheet, considering factors like depreciation or amortization.