Messrs. Sharp and Green having given the firm’s notes to a friendly company as an accommodation, became embarrassed through failure of the payee and appointed a trustee to realize and liquidate. The following is a statement of their condition January 1, 1916:
| Assets | Liabilities and Capital | ||
| Cash | $ 500.00 | Mortgage on Real Estate | $ 5,000.00 |
| Merchandise | 20,000.00 | Mortgage Interest Accrued | 250.00 |
| Real Estate | 25,000.00 | Taxes Accrued | 375.00 |
| Notes Receivable | 5,000.00 | Accounts Payable (including | |
| Accounts Receivable | accommodation paper as contra) | 61,550.00 | |
| (including accommodated | Notes Payable | 1,000.00 | |
| party $58,000) | 62,000.00 | Henry Maxwell, Special Partner | 10,000.00 |
| Samuel Green, Capital | 20,325.00 | ||
| James Sharp, Capital | 14,000.00 | ||
| $112,500.00 | $112,500.00 | ||
The following is a memorandum of the trustee’s transactions for the year: purchases to complete contract orders $70,000; sales for the year for cash $108,000; uncollected accounts $2,000; stock of goods on hand December 31, 1916, $10,000; notes receivable collected at a loss of $600; accounts receivable collected $3,600, balance lost; received 75% in full settlement of accommodation notes and paid cash on account of same $48,000 giving renewal notes for $10,000. The legal fees and petty expenses paid on account of accommodation paper amounted to $2,400. The following payments were also made: mortgage, with interest, and one year’s accrued interest to December 31, 1916; all taxes, notes payable, and accounts payable; and clerk hire, wages, and other expense, including an allowance of $100 per month to each of the active partners, one year’s interest at 6% to Maxwell, interest on Green’s excess capital ($6,325) for one year at 6%, and trustee’s fee of $5,000—in all $10,000.
The special partner had a ¹/₁₀ interest and the general partners shared alike in the residue of the net profits.
On January 1, 1917, the estate was returned to the owners.
Prepare the trustee’s realization and liquidation account in technical form, supported by trustee’s cash account. Show a balance sheet of the estate as turned back to the partners, and set up the partners’ accounts.
XXVII
Three partners contribute capital as follows: X $90,000, Y $45,000, Z $15,000. They share profits in the proportion of X 50%, Y 30%, Z 20%. X’s salary is $5,000, Y’s salary is $3,000, Z’s salary is $2,000. At the end of their fiscal period X dies. The books are closed and the net assets ascertained to be $152,500. Z and Y liquidate the firm’s affairs and distribute the surplus assets quarterly as follows:
| First quarter | $42,410.20 | |
| Second quarter | 74,622.30 | |
| Third quarter | 31,967.50 | $149,000.00 |
Prepare a statement of the partners’ accounts, showing how the distribution of assets should be made, together with the apportionment of the loss. Give your authorities.