Liquidation Of Partnership.docx

LIQUIDATION OF PARTNERSHIP continuation liquidation by lump sum, after this is the liquidation by installment. ANOTHER EXAMPLE: The following balance sheet is presented to you. partners A , B, C shares profit 5: 3: 2: A drawing debit balance B DRAWING ACCTS. RECEIVABLE A LOANS PAYABLE B A CAPITAL B CAPTAL C. CAPITAL ASSETS CASH OTHER LIAB. TOTAL

( 12,000 4,800 ( 7,200 14,400 59,400 44,400 39,000 147,000 64,200 68,400 211,200

211,200

AFTER THE LIQUIDATION, C, WILL RECEIVE 33,000.00 REQUIRED. 1. COMPUTE THE CAPITAL OF THE PARTNERS PRIOR TO THE SALE OF NON CASH ASSETS. 2. COMPUTE THE TOTAL LIABILITIES TO OUTSIDERS. 3. COMPUTE LOSS ON REALIZATION. 4. PREPARE LIQUIDATION STATEMENT. ANSWER. FOR NO. 1 QUESTION( what is capital before sale of non cash) A B CAPITAL BEFORE OFFSET 59,400 44,400 OFFSET: DEBIT BALANCE OF DRAWING (12,000 CREDIT BALANCE OF DRAW ACCTS RECEIVABLE FROM A ( 7200) LOANS PAYABLE B 14,400 TOTAL net equity before sale assets 40,200 58,800

C 39,000

4,800

IN COMPUTING THE NET EQUITY, THE FOLLOWING SHALL BE THE FORMULA CAPITAL PER BOOKS 142800 PLUS: LOANS PAYABLE 14400 PLUS CREDIT BALANCE OF DRAW 4800 LESS: ACCTS RECEIVABLE PARTNERS (7200) DEBIT BAL OF DRAWING (12000) TOTAL NET EQUITY 142800 EXplanation: the net equity is computed as ff:

43,800 142,800

Balance of capital accounts add: any loans payable to partners credit balance of drawing less: any advances to partners debit balance of drwings

xcxx xxxx xxxx xxx xxxx

NET EQUITY.......................................... XXXX ================================================================ Computation for question no.2( how much is liabilities) TOTAL ASSETS 211,200 less NET EQUITY.............................................................................................. 142,800 = liabilities to outsiders......................................................................................... 68400 explanation: By using the balance sheet equation of ASSETS LESS LIABILITES = CAPITAL OR CAPITAL LESS ASSETS IS EQUAL TO LIABILITIES. OR LIABILITIES PLUS CAPITAL = ASSETS +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

ANSWER FOR NO. 3 (LOSS ON REALIZATION) SINCE IT SAID THAT B WILL RECEIVED 33,000, WHICH IS OF COURSE 20% EQUIVALENT , THEREFORE 33,000 DIVIDE 20% = 88,800 WHICH IS THE NET CASH AVAILABLE FOR DISTRIBUTION, USING THIS FIGURE A WORK BACK CAN BE USED TO ARRIVE AT THE LOSS ON REALIZATION AS FF: NET CASH AFTER PAYING OF LIABILITIES ADD: LIABILITIES PAID TOTAL CASH AFTER SELLING OF ASSETS

88,800 see above 68,400 given 157,200cash bfore selling but include 64200 beg

LESS : cash before selling 64,200 deduct so can arrive purely proceeds EQUALS PROCEEDS OF THE SALE OF ASSETS 93,000 given LESS: COST NON CASH ASSETS 147,000given = LOSS ON SALE OF ASSETS 54,200 ======================================================================== ANSWER FOR NO. 4

BALANCES OFFSET

cash non A/R liab. loans 64200 147000 7200 68400 14400 7200 7200 0

balances proceeds pay loss on sale balance

93000 68400

93000

draw A B C 59400 44,400 39000 7200 ( 12000) 4800 14,400 ( 7200 ) 14400 68400 0 0 40200 58800 43800

68400 68400

54000 88800

0

27000 13200

16200 42600

10800 33000

balance

88800

13200

42600

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++== ANOTHER PROBLEM: a balance sheet for JOSH company are shown : CASH ACCTS REC BAD DEBTS INVENTRY

40,000 65000 5,000 80000

TOTAL

180,000

PAYABLE LOANS PAY JAKE JAKE CAP JACK JOJO

73000 5000 42000 50,000 10,000 180,000

the non cash was sold at 60,000. they share profits jake 55%, jack 15%, jojo 30% CASE 1 JAKE AND JOJO ARE INSOLVENT. prepare journal entries. CASE 2 : JAKE SOLVENT, JOJO INSOLVENT . PREPARE LIQUIDATION STATEMENT CASE 1 ENTRY 1 SELLING OF ASSETS CASH 60,000 ALLO. BDEBTS 5,000 LOSS ON REALI 80,000 A/R INVENTORY SALE OF ASSETS AT A LOSS.

65,000 80,000

JAKE CAPITAL 44,000 JACK 12000 JOJO 24000 LOSS ON REALIZATION 80000 charge capital due loss on realization LOANS PAY

5000

CAPITAL JAKE 5,000 to transfer loans pay to JAKE TO HIS CAPITAL JACK 43000 JAKE 39000 JOJO 4000 TO charge the capital of JACK FOR THE DEFICIT OF JAKE AND JOJO they being insolvent

33000

====================================================================== CASE 2. THE ANSWER IS FINALLY, JOJO WILL HAVE 14,000 DEFICIT , HE IS INSOLVENT, JAKE AFTER SHARING ON TEH DEFICIT OF JOJO WILL HAVE CAPITAL DEFICIT OF 8,000 BUT HE IS SOLVENT SO HE PAYS THE 8,000. =========================================================================== ANOTHER PROBLEM VIC, VICOR, VEN, VON, SHARE 3: 4 , 6,, 8 .= 21 TOTAL BALANCES :OF CAPITAL

vi

vicor ven von 2500 62500 62500 22500

150,000

the non cash was sold at 58,000, after paying liabilities ,cash amount is only 7500. they had 55,500 cash to divide required 1. cash balance before realization 2. total of non cash 3. loss on realization 4. liquidation statement answer to no. 3 IF THE ENDING CASH AFTER PAYING PAYING 7500 liabilities , THAT MEANS , BEFORE PAYING LIAB. IT HAS CASH OF 63,000 ( 55,500 plus 7500) BUT NO MORE NON CASH ASSETS BECAUSE ALREADY SOLD. BUT THE LIAB, STILL 7500 AND CAPITAL IS 150,000.00 . PUTTING THAT INTO ACCOUNTING EQUATION IT WOULD APPEAR LIKE THIS CASH

63,000

LIAB. CAPITAL

TOTAL 63,000 take note the balance sheet is not balance by TOTAL 63,000

7500 150,000 157,500 (94,500). 63000

CONSIDERING THE LOSS ON REALIZATION IS UNKNOWN , AND SINCE THE BALANCE SHEET IS NOT BALANCE BY 94,500, IT IS ASSUMED THAT THERE IS A LOSS OF 94,500, SO THAT IF YOU WILL PUT NET LOSS TO THE CAPITAL SIDE THE BALANCE SHEET WILL BALANCE, HENCE, THE LOSS IS 94,500.00 answer to no. 2 WHAT IS TOTAL NON CASH NOW , SINCE THE LOSS ON SALE IS 94,500 AND THE PROCEEDS IS 58,000, ADDING LOSS AND THE PROCEEDS WOULD EQUAL TO 152,500.00 AS THE BOOK VALUE OF THE NON CASH ASSETS.

LOSS ON SALES ADD PROCEEDS

94500 58000

TOTAL NON CASH 152500

answer for no. 1 NOW , IF THE CASH BALANCE AFTER REALIZATION IS 63,000 AND THE PROCEEDS OF SALE IF 58,000, THEREFORE DEDUCTING TH 58,000 FROM 63,000, THE BEGINNING CASH IS 5000.00 5000 CASH BEG final cash end 55,500 58000 PROCEEDS add :liab. paid 7500 63000 cash after sale 63,000 7500 PAY LIAB less: proceeds 58,000 55,500 FINAL CASH equals cash beg 5,000 ================================================================= LIQUIDATION BY INSTALLMENT METHOD .1. Under this method the sale of non cash are by piecemeal 2. liabilities are paid partial. 3. any cash balance is distributed to partners. when payment are made partners in installments ,they received money before knowing losses will be incurred.. if losses occurred and a deficits has resulted to their capital , the LIQUIDATOR HAS TO REQUEST THE RETURN OF CASH PAID TO THE PARTNERS. IF THE LIQUIDATOR CANNOT RECOVER THE CASH, HE WILL BE RESPONSIBLE BUT TO BE ABLE TO AVOID SUCH A SITUATION , NO PARTNERS SHALL BE PAID MORE THAN TO WHICH THEY ARE ENTITLED . AT EACH INTERVAL IN WHICH A CASH DISTRIBUTION IS MADE A SCHEDULE OF SAFE PAYMENTS IS MADE . THAT MEANS IN CASE A DISTRIBUTION IS CALLED AFTER SELLING NON CASH....... A SAFE PAYMENT SCHEDULE IS TO BE PREPARED AND THE AMOUNT FOR EACH PARTNER SHALL BE THE ONE TO BE USED IN ALLOCATING PAYMENT TO HIM.. WHAT IS THE PURPOSE OF THE SAFE PAYMENT SCHEDULE AS YOU KNOW, IT IS NOT AUTOMATIC THAT YOUR PROFIT AND LOSS SHARING RATIO IS THE SAME WITH YOUR CAPITAL RATIO AGAINST THE TOTAL CAPITAL.' EXAMPLE CAPITAL CAPITAL RATIO PROFIT LOSS SHARING RATIO

A 36000 60% 75%

B C 12.000 12000 60,000 20% 20% 100% 15% 10% 100%

IN CASE A LOSS , SAY 80,000, THE SHARE OF PARTNER A IS 48,000 WHERE HIS CAPITAL IS ONLY 36,000, SO HE WILL HAVE AN INSTANT DEFICIT OF 12000.00., WHERE HIS CO PARTNER MAY ABSORB THE 12,000. IF THIS IS THE CASE OF PARTNER A , HE WILL NOT BE ENTITLED TO THE INITIAL CASH DISTRIBUTION ( of course after all assets are sold he will have a share on cash), SO THAT THE PARTNER WHOSE CAPITAL RATIO IS HIGHER THAN HIS SHARE RATIO LIKE B, C. CAN HAVE THE PRIORITY IN THE CASH DISTRIBUTION. SO THIS SAFETY PAYMENT SCHEDULE IS MADE SO THAT THOSE PARTNERS THAT HAS THE LEAST TO THE

LOSS , SHALL ALSO HAVE THE PRIORITY TO THE CASH DISTRIBUTION. IF ONLY THE CAPITAL RATIO AND THE PROFIT SHARING RATIO IS THE SAME , THERE IS NO NEED TO MAKE THIS SAFETY PAYMENT SCHEDULE BECAUSE ANYWAY ANY LOSS CAN BE ABSORB BY THE CAPITAL OF EACH PARTNER. IF THERE IS NO PAYMENT SAFETY SCHEDULE, PARTNER A WILL STILL HAVE A SHARE ON THE INITIAL CASH DISTRIBUTION THOUGH HE SHOULD NOT HAVE BECAUSE OTHER PARTNERS HAS THE PRIORITY BECAUSE OF THEIR HIGH CAPITAL RATIO. HOW IS DONE: 1. AN assumption has to be made on non cash assets as worthless and distribute this as possible loss . 2. to retain sufficient amount of cash for liabilities and include this amount as part of possible loss. 3. retain sufficient amount for expected liquidation expenses and include as possible loss. 4. if partner has debit balance of after , 1,2,3 steps allocate debit balance to the remaining partners 5, any cash in excess of the amount reserved in 2, 3, can then be distributed t those partners with creidit balance up to the amount of such credit balance. EXAMPLE: GREG, JUN, ABEL, BONN shares profit 2,1,1,1 .

non cash

606,000

liabilities loans greg loans bon GREG CAP JUN CAP ABEL CAP BON CAP total 606,000 t0tal TAKE NOTE NO CASH IS AVAILALBE. , NONE TO DISTRIBUTE YET.

280,000 20,000 10,000 88,000 86,000 68,000 54,000 606,000

below is the liquidation period july aug sept

assets 300,000 240,000 66,000

proceeds loss liquidation exp. liab. paid paid partners remain 240,000 60000 4000 220,000 16000 112,000 128,000 9200 60000 54,800 4,000 16000 50,000 6400 13600 238000 =================================================================== statement of liquidation cash non cash liab. loans greg loans bon greg jun abel bon BAL 0 606,000 280000 20000 10000 108000 86000 68000 64000 sale/loss dist 240,000 300000 (24000 12000 12000 12000) \ liq.exp 4000) ( 1600 800 800 800) pay liab 220,000 220,000

bal 16000 306000 60000 51200 sale.loss dist 112000 240000 liq.ex 9200 payliab 60000 60,000 balance 58800 66000 PAYMENT 54800 see sch of safe payment BALANCE 4000 66000 sale 16000 66000 loss 50000 liq.exp 6400 80 bal distribute 13,600

82400 73200 55200 51200 25600 25600 25600 3680 1840 1840 1840 27520 45760 27760 23760 0 31600 13600 9600 27520 14160 14160 14160 20000 10000 10000 10000 2560 1280 1280 12

4960

2880

2880

2880

TAKE NOTE THAT WHEN THE SALE OF ASSETS WERE MADE , THERE IS NO AUTOMATIC DISTRIBUTION OF PROCEEDS, BECAUSE THEY WISH TO DO IT IN AUG , AND THAT DISTRIBUTION STARTED AFTER SELLING THE 240000 WORTH OF ASSETS , THEREBY THE SCHEDULE OF SAFE PAYMENTS IS MADE SHOWN BELOW . HOWEVER IF THEY WANTED TO DISTRIBUTE CASH AT THE ONSET OF CONVERTING NONCASH ASSETS TO CASH, A SCHEDULE OF SAFE PAYMENT SHALL ALSO BE MADE. when a distribution of cash to partners is called , a schedule of safe payment is made, before the calling of payment amounting to 54800, there still a 66,000 worth of unsold assets, which should be presumed to be a total loss or considered unsaleable or gone for scrap for purposes of allocating payment of 54800 and after paying 54800 a remaining cash on hand of 4000.00 , will also be untouchable therefore the total to be considered loss is 70,000 (66,000 ;plus 4000.00 or 70,000. as shown below. In view of that DISTRIBUTION OF ASSUMED LOSS OF 70,000 , GREG CAPITAL BECAME DEFICIENT IF THE NON CASH OF 66000 WILL BE PRESUMED a total loss , HENCE HE RECEIVES NO CASH PAYMENT as shown above AND AS PROVEN by THE SCHEDULE OF SAFE PAYMENTS BELOW. UNLIKE WHEN THERE IS a distribution by LUMP SUM OR A NO SCHEDULE OF SAFE PAYMENTS, , GREG WILL HAVE A SHARE ON THE PROCEEDS AND SAME TIME SHARE ON THE LOSS, WHICH GREG MAY LATER ON BECOMES DEFICIENT AND ALSO THAT THE REST OF THE PARTNER WHO HAS BIG CAPITAL MAY RECEIVE A LESSER CASH DISTRIBUTION, . SO TO PREVENT SUCH THING TO HAPPEN A SCHEDULE OF SAFE PAYMENT IS MADE... THEREFORE WHEN A SAFE PAYMENT SCHEDULE IS BEING USED , THE PARTNERS WHOSE ACTUAL CAPITAL RATIO VS TOTAL CAPITAL IS SMALLER SAY IN CASE Of GREG 22% CAPITAL RATIO , THAN HIS PROFIT AND LOSS SHARE OF 40%, IS PREVENTED FROM RECEIVING A SHARE ON THE CASH AVAILABLE BECAUSE WHAT WILL HAPPEN WHEN THE SCHEDULE OF PAYMENT IS MADE, HIS CAPITAL WILL BECOME DEFICIENT BECAUSE HIS SHARE RATIO IS 40% ON THE COST OF THE TOTAL LOSS OF 50,000 WHILE HIS CAPITAL RATIO IS ONLY 22% , NATURALLY HAVING 40% SHARE , WILL HAVE A BIGGER SHARE ON THE LOSS OF 50,000. EVEN THE NEXT PARTNER HAVING A BIG GAP ON HIS ACTUAL CAPITAL RATIO VS. HIS PROFIT AND LOSS SHARING RATIO LIKE PARTNER VON 19%,CAPITAL RATIO, BUT SHARE RATIO IS 20%. ON THE OTHER HAND IF THERE IS NO SCHEDULE OF SAFE PAYMENTS AND A STATEMENT OF LIQUIDATION IS MADE . GREG WILL HAVE A SHARE OF 21920 COMPUTED 54800 X 40%. WHILE WITH SAFE PAYMENT SCH. HE HAS NO SHARE ON THE 54800 BECAUSE IT WAS FOUND OUT THAT HE WILL BE DEFICIENT.

SCHEDULE OF SAFE PAYMENTS . balances before dist possible loss : unsold assets 66000 remain cash 4000 70000 balance transfer deficit FREE INTEREST

greg 27520

28000 (480 480 0

jun abel bon total 45760 27760 23760 124800

14000 14000 14000 70000 31760 13760 9760 54800 160) 160) 160 ) 31600 13600 9600 54800

THE 70,000 SHALL BE ALLOCATED OR DEDUCTED TO THEIR CAPITAL , BUT GREG CAPITAL NOT SUFFICIENT AND LACKS 480.00 HENCE HE WILL NOT RECEIVE ALLOCATION AS SHOWN ON LIQUIDATION STATEMENT. THIS FREE INTEREST of 54800 NOW WILL USED TO ALLOCATE CASH DISTRIBUTION TO PARTNERS AS AGREED. ON THE STATEMENT OF LIQUIDATION. any subsequent proceeds on sale of non cash occurred and no schedule of payments is announced that proceeds shall not be alllocated meantime untill the whole non cash was sold. What will be allocated is the loss on realization of sales as shown in the schedule of liquidation above. If all has been sold, the remaining cash now will be distributed in accordance with their sharing ratio. journal entry: CASH 240,000 LOSS ON REALIZATION 60,000 NON CASH ASSETS 300,000 to record sale of assets at a loss. liquidation exp cash to record liquidation exp. accts pyable cash To pay outside creditor

4,000 4000

220,000 220,000

CAPITAL GREG 25600 CAP JUN 12800 CAP ABEL 12800 CAP VON 12800 LOSS ON REALIZATION 60,000 LIQUIDATION EXP 4,000 to charge the capital accounts for the loss and expenses. ======================================================================== 2nd month

entry 1 CASH 112,000 LOSS 128000 NON CASH 240000 sale at a loss of non cash entry 2 liq. exp cash liq. exp.

9200 9200

entry 3 CAP GREG 54880 CAP JUN 27440 CAP ABEL 27440 CAP VON 27440 LOSS LIQ LIQ. EXP

128000 9200

To charge capital due to n lossess entry 4 APAY 60,000 CASH 60000 to pay outside creditors. entry 5 CAP GREG CAP JUN 31600 CAP ABE 13600 CAP VON 9600 CASH 54800 To distribute cash to partners. =================================================================== 3rd month CASH 16000 LOSS 50,000 NON CASH 66000 LIQ. EXP CASH

6400 6400

CAP GREG 22560 JUN 11280 ABEL 11280 VON 11280 LOSS REAL. LIQ. EXP

50,000 6400

LOANS PAYABLE GREG LOANS VON

20000 10,000

CAP GREG 20,000 CAP VON 10000 to transfer the loans payable to capital account. CAPITAL GREG 4960 JUN 2880 ABEL 2880 VON 2880 CASH to pay the partners.

13600

=================================================================== HOW TO PREPARE SCHEDULE OF SAFE PAYMENTS WHEN IT IS TIME TO DISTRIBUTE CASH TO PARTNERS.AND THE SALE OF ASSETS HAS NOT YET STARTED.

This is a schedule shows the capital balances which include the loan payables but would automaticaaly deduct an amount from it the excess of capital as against the CASH AVAILABLE FOR DISTRIBUTION. iN EFFECT , CASH BALANCE LESS . CAPITAL IS A presumed CASH DEFICIENCY to pay the capital of the partners , shortage IS AUTOMATICALLY DEDUCTED FROM THE CAPITAL that would result to the cash balance. Since that cash shortage will be deducted to their capital , there will be a tendency that some ofthe partners will have a negative capital afterwards. Any NEGATIVE capital balances after deducting this CASH DEFICIENCY VS. CAPITAL shall be transferred to the partners whose capital is still credit balance . After having transferred their share on the deficient partner , their capital may in turn becomes deficient then the partners with positive capital balance will again shoulder those deficient partner AND THIS PROCESS WILL NOT STOP UNTIL THERE IS A DEFICIENT PARTNER. THAT MEANS THIS SCHEDULE WILL SHOW THE TOTAL CASH END ALWAYS AND FINALLY THIS WILL BE APPLIED TO THE LOAN OF THE PARTNERS IF any, AND TO GET THEIR INDIVIDUAL SHARE ON THE END CASH A COMPANY OF A, B C, D has the following balances , sharing 5, 3,1,1, A ADVANCES LOANS CAPITAL

B

C 18000

20000 160000

40000 120000

60000

D TOTAL 10000 28000 60000 100000 440000

BUT THERE IS AN AVAILABLE CASH OF 72,000.00 AVAILABLE FOR DISTRIBUTION. Since the the non CASH but saleable assets are not given, it can be computed as ff: USING ACCOUNTING EQUATION:

CAPITAL 440,000 LOANS PAYABLE 60,000 TOTAL LIAB AND CAP 500,000 LESS : GIVEN ASSETS 72000 ADVANCES 28000 100,000 == OTHER ASSETS 400,000 Now therefore the non cash items that is subject for sale is 400,000 which shall be meantime assumed to be A TOTAL LOSS, SCRAPPED , BURNED ETC. and therefore automatically absorbed or deducted to the capital of the partners this example OF SAFE PAYMENTS is where the sales of non cash has not started yet but there is a cash available.. EXAMPLE:

SCHEDULE OF SAFE PAYMENTS A B

CAPITAL LOANS ADVANCES BALANCES Less: shortage of cash vs. capital balances share of deficiency A balance share of deficiency C FREE BALANCE

160,000 20,000

120,000 40,000

180000

60,000

160,000

200,000 ( 20000) 20000 -

18,000 42,000

120,000 40000 (12000 28000 (1500 26,500

Distribute as ff: to loans to capital

C

40,000 2000 (4000 (2000) 2000

26,500

D 100,000 10,000 90,000

440,000 60,000 28000 472,000

40,000 400000 50000 72000 (4000 46000 72000 500 45,500 72000

45,500 45500

26500

TOTAL

26,500 45,500 72000

explanations: Since A CAPITAL became short of 20,000 because his capital is not sufficient to cover for his share on the cash deficiency , B, C. D Shall reduced their capital and transferred to A. so A CAPITAL WILL SHOW NO MORE NEGATIVE IN accordance with their sharing ratio as ff: A B C D TOTAL

5 50% 3 30% 1 10% 1 10% 10 100%

3 divide 5 60% X 20,000 =12,000 1 div 5 20% X 20,000 4000 1 div 5 20% 4000 5 100% 20,000

ANOTHER DEFICIENCY OCCURED THIS TIME TO C. FOR 2000 B C

3 1

75% 25%

X X

2000 2000

1500 500

total

2000

SINCE THERE IS NO MORE DEFICIENT PARTNER , THE CASH BALANCE CAN BE DISTRIBUTED TO THE PARTNER HAVING positive CAPITAL BALANCES . SINCE B HAS A REMAINING CAPITAL BUT HE HAS LOANS RECEIVABLE FROM THE FIRM , THAT REMAINING CASH BALNCE FOR HIM OF 26,500 WILL BE USED TO PAY HIS LOANS RECEIVALBE to THE FIRM AND D WILL RECEIVE 45,500. THE CASH BALANCE OF 72000 AT THE BEGINNING IS SHARE BY B AND D. IN THE EVENT THAT PART OF THE 400,000 WILL BE SOLD LATER , THE PROCEEDS SHALL BE DISTRIBUTED IF THEY WANTED AND THE LOSS on sale SHALL AGAIN BE DISTRIBUTED.UNTIL ALL THE 400,000 IS SOLD. IF ANY WILL BECOME DEFICIENT AS A CONSEQUENCE OF THE LOSS , THEN THE REMAINING partner SHALL ABSORB THAT DEFICIENCY If THE PARTNER with deficiency IS INSOLVENT. JOURNAL ENTRY: LOANS PAYABLE 26,500 C. CAPITAL 45,500 CASH 72000 to distribute the cash balance prior to realization in accordance with the safe payments schedule. ============================================================== ANOTHER EXAMPLE. HENRY, JOHN, PAUL, has the following balance. sharing. 40%, 35%, 25% cash non cash

12,000 276,000

paybles loan jonh loan PAUL HENRY JOHN PAUL

36,000 30,000 15000 86700 75300 45,000

THE LIQUIDATION APRIL MAY JUN JULY TOTAL

BOOK VALUE 72000 42000 90000 72000 276000

PROCEEDS 63000 36000 60000 24000

LIQ. COST 3000 4500 3600 2400

RETAINED CASH 12000 7500 3000

SCHEDULE OF SAFE PAYMENTS. PROFIT SHARE RATIO 40% 35% 25% CAPITAL RATIO 34.4% 41.8% 23.8% BALANCES HENRY JOHN PAUL TOTAL 86700 75300 45000 207000 LOANS BALANCES 30000 15000 45000 TOTAL 86700 105300 60000 252000 ASSUMED LOSS 240000