Lennon,Newman,and Ott Operate the LNO Partnership

question 27

Essay

Lennon,Newman,and Ott operate the LNO Partnership.The partnership agreement provides that the partners share profits in the ratio of 40:40:20,respectively.Unable to satisfy the firm's debts,the partners decide to liquidate.Account balances just prior to the start of the liquidation process are as follows:
During the first month of liquidation,other assets with a book value of $150,000 are sold for $165,000,and creditors are paid.In the following month unrecorded liabilities of $12,000 are discovered and assets carried on the books at a cost of $90,000 are sold for $36,000.During the third month the remaining other assets are sold for $42,000 and all available cash is distributed.
Required:
Prepare a schedule of partnership realization and liquidation.A safe distribution of cash is to be made at the end of the second and third months.The partners agreed to hold $30,000 in cash in reserve to provide for possible liquidation expenses and/or unrecorded liabilities.All of the partners are personally insolvent.

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