[forever4]

This answer is correct. The solutions approach is to prepare an abbreviated statement of partnership liquidation. Recall that in a partnership liquidation, cash is distributed based on the capital balances of the partners after adjusting them for any income (loss) to the date of liquidation, including the sale of partnership assets, and any loans or advances between the partnership and one or more of the partners. The abbreviated statement follows:

Lever Polen Quint Total

Beg. capital bal. $310,000 $200,000 $190,000 $ 700,000

Adj. for loans (20,000) — 30,000 10,000

Adj. for loss on sale of other assets* (52,000) (39,000) (39,000) (130,000)

Adj. capital bal. $238,000 $161,000 $181,000 $ 580,000

*($830,000 – $700,000)

Note that the payment of the partnership’s liabilities to outside creditors does not affect the abbreviated statement of liquidation as only equity related items are shown and there was sufficient cash to cover all liabilities. The total adjusted capital balances is reconciled to total cash available as follows: $90,000 original cash balance + $700,000 from asset sale – $210,000 liabilities to creditors = $580,000.

THe loan is 20k from L. Why only Quint pay 30k? Why doesnt P pay anything???

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