PARTNERSHIP CASH PRIORITY SCHEDULE

THIS CASH PRIORITY SCHEDULE IS ANOTHER TYPE OF SCHEDULE OF DISTRIBUTION OF CASH IN TIME OF LIQUIDATION OF PARTNERSHIP.

THIS CASH PRIORITY SCHEDULE OR PROGRAM IS CALLED REFERRED TO A PREDISTRIBUTION PLAN, OR ADVANCE PLAN FOR THE DISTRIBUTION OF CASH .
THIS PROGRAM OR SCHEDULES SPECIFIES THE ORDER OR SEQUENCE OF PRIORITY  IN WHICH EACH PARTNER WILL PARTICIPATE  IN THE CASH DISTRIBUTION AND THE AMOUNT OF EACH PARTNER WILL RECEIVE AS CASH BECOMES AVAILABLE.

THE PROCEDURE IN PREPARING THIS PLAN .

THE OBJECTIVE OF THIS PLAN IS TO DETERMINE THE SEQUENCE OF THE PARTNER  AND THE AMOUNT OF CASH  HE WILL RECEIVE  WHEN A DISTRIBUTION OF CASH is MADE .  . 

TAKE NOTE THAT  THE PROFIT SHARING RATIO IS NOT  AUTOMATICALLY THE RATIO OF THEIR CAPITAL TO TOTAL CAPITAL.   

THE MOMENT THEIR CAPITAL RATIO BECOMES OR THE SAME WITH THEIR PROFIT AND LOSS SHARING RATIO,  there will be NO PARTNER that will  unduly absorb the cash distribution or the loss because their sharing ratio is the same with their capital..

THE FOLLOWING STEPS.

FIRST.  1.    COMPUTE or get the total of EQUITY OR INTEREST OF EACH PARTNER BY COMBINING  THE CAPITAL, THE LOANS PAYABLE LESS THE ADVANCES FOR RECEIVABLE .  THIS IS NORMALLY GIVEN BASED ON THE BALANCE SHEET.

SECOND   2  .  DIVIDE THE EQUITY  IN NO1  OF EACH PARTNER AS AGAINST HIS PROFIT SHARING RATIO.  THE ANSWER  IS AN  AMOUNT  OF A TOTAL LOSS THAT WHEN INCURRED BY THE FIRM ,  THE PARTNER SHARE TO THAT LOSS IS EQUAL TO HIS CAPITAL.   THAT AMOUNT ALSO MAY REPRESENT THE SUPPOSED TOTAL CAPITAL OF THE PARTNERSHIP .  EACH PARTNER WILL HAVE  THIS SUPPOSED TOTAL CAPITAL.  THT MEANS IN CASE THE LOSS ON REALIZATION IS EQUIVALENT TO THAT SUPPOSED CAPITAL , THE CAPITAL OF THAT PARTNER CAN ABSORB SUCH LOSS.
 EXAMPLE.

          YOUR CAPITAL IS   20,000 , YOU SHARE RATIO IS 20%
          DIVIDE 20,000 BY 20% IS  100,000, WHICH IS THE  POSSIBLE LOSS TO HAPPEN, WHICH If MULTIPLIED BY YOUR SHARE OF 20% WOULD EQUAL TO 20,000, WHICH  IS EXACTLY  COVERED BY YOUR CAPITAL OF 20,000.00

      EACH PARTNER WILL HAVE ITS OWN  AMOUNT of  absorption capability THAT WHEN MULTIPLIED BY HIS SHARE WILL EQUAL TO HIS CAPITAL.


THAT AMOUNT NORMALLY VARIES FOR EACH PARTNER ,  DEFINITELY THERE WILL BE AN ABSORPTION CAPACITY WHICH IS BIGGEST , THE SECOND,  THE THIRD , THE FOURTH SO ON SO FORTH .  THE PARTNER WILL THE HIGHEST ABSORPTION CAPABILITY WILL NATURALLY RECEIVE THE FIRST DISTRIBUTION OF CASH AFTER THE OUTSIDERS CLAIM. . THE PARTNER WITH THE LOWEST ABSORPTION POTENTIAL WILL BE THE LAST PARTNER TO RECEIVE DISTRIBUTION.

THIRD  3.   THE PARTNER WILL THE HIGHEST ABSORPTION LOSS POTENTIAL SHALL HIS CAPITAL BE BROUGHT EQUAL TO THE NEXT HIGHEST ABSORPTION LOSS POTENTIAL,   THAT MEANS AN AMOUNT SHALL BE DEDUCTED FROM THE ABSORPTION AMOUNT OF THE HIGHEST PARTNER AND ADD IT TO THE NEXT HIGHEST PARTNER.to bring their adjusted capital at same amount.  that amount is the edge of the highest against the next higher IN TERMS OF ABSORPTION CAPACITY , that means this amount represent    an amount subject to cash distribution for the highest partner using his profit share ratio.  the second highest now has the same amount of absorption with the highest.  Now since the third highest has a smaller absorption amount,  compared to IST AND SECOND,  now to  equal that absorption amount  the difference in their absorption amount shall be deducted from the IST TO THE SECOND..  THAT DIFFERIATIAL AMOUNT NOW IS THE EDGE OF IST AND SECOND OVER THE THIRD, THIS IS NOW THE AMOUNT TO BE APPLIED BY THEIR PROFIT RATIO TO OBTAIN THE AMOUNT OF THIER SHARE IN THE CASH DISTRIBUTION. NOW, THE IST, 2ND , 3RD HAVE ALREADY HAVE AN EQUAL ABSORPTION AMOUNT.   NOW , THE FOURTH  ABSORPTION AMOUNT OF THE 4TH PARTNER IS AGAIN DIFFERENT WITH THE IST , 2ND , 3RD.,, , DEDUCT FROM IST, 2ND, 3RD THAT DIFFERENCE OF ABSORPTION .  THIS PROCESS CONTINUES UP TO THE LAST PARTNER. 

IF YOU WILL IMAGINE,  IF THERE ARE 4 PARTNERS, THREE PARTNERS WILL HAVE THE SAME ABSORPTION DIFFERENCE AT THE END OF THIS PROCESS  COMPARED WITH LAST PARTNER AND THIS DIFFERENCE SHALL BE THE AMOUNT TO BE MULITPLIED T THEIR PROFIT SHARE RATIO TO OBTAIN THE ALLOCATED CASH FOR THEM.FOR THIS LAST 3RD STAGE..

THERE ARE THREE STAGES IF THERE ARE 4 PARTNERS:
    1.     DIFFERENCE BETWEEN  ist  and  2nd X PROFIT RATIO OF FIRST-=his  INITIAL cash
    2.  DIFFENCE BETWEEN IST,  and 3rd,  then difference between 2nd and  third x their ratio
    3.  difference between ist and 4th, then 2nd and 4th, then 3rd and 4th

 IN THIS PROCESS,  YOU WILL KNOW HOW MUCH  INITIAL CASH CAN BE RECEIVED BY THE FIRST , THE SECOND AND THE THIRD OR THE SECOND TO THE LAST PARTNER. THAT TOTAL AMOUNT TO BE RECEIVED BY THE PARTNERS BASED ON THIS CASH PRIORITY PROGRAM IS THE MINIMUM AMOUNT THAT THEY WILL HAVE IN CASE THE CASH TO BE DISTRIBUTED IS MORE THAN THIS AMOUNT .  EXAMPLE IF THE CASH AVAILABLE IS 86,000 , AND THIS CASH PRIORITY PROGRAM COMPUTED IS 86,000 , THEN THIS IS ALREADY THE AMOUNT TO BE DISTRIBUTED TO THE PARTNERS, BUT IN CASE THE AVAILABLE CASH IS  MORE THAN 86,000  , THE EXCESS FROM 86,000 SHALL BE MULTIPLIED TO THEIR INDIVIDUAL PROFIT SHARE RATIO , TO INCLUDE THE LAST PARTNER.
IF HOWEVER  THE TOTAL CASH THE PARTNERS ARE ENTITLED IN THE CASH PROGRAM  IS BIGGER THAN THE ACTUAL OF CASH TO BE DISTRIBUTED , THEN THE SEQUENCE OF PRIORITY TO THAT CASH AVAILABLE IS:

       FIRST DEDUCT THE ACCTS PAYABLE FROM THAT AVAILABLE CASH.
            1.   THE AMOUNT ENTITLED TO THE FIRST PARTNERS  SHALL BE GIVEN TO HIM.
             2,  ANY EXCESS OF THE CASH OVER THE NO. 1,  SHALL BE GIVEN  TO SECOND PARTNER AND TO THE IST PARTNERS  AS PER THE CASH PRIORITY PROGRAM.
      
EXAMPLE:

IF THE AMOUNT OF CASH IS SMALLER THAN THE ONE INT HE CASH PROGRAM , SAY   5000 AND CASH PROGRAM IS 16925 AND THE OUTSIDE LIABILITES  500, THE FF IS THE DISTRIBUTION.   assuming partner 1  shares 50% , partner 2   40%,  ,  partner 3  10%

     CASH PRIORITY  PROGRAM  SCHEDULE
                                       LIAB.          IST                  2ND                       3RD   TOTAL
                                                       partner               partner                    partner
                                    
   ist priority                                    10,000                                                          10000
   2nd                                                2000                 1000                                   3000
  3rd priority                                      2000                  1000                 925           3925
   total                                                                                                                 16925


BUT THE CASH IS ONLY  14,000 . AND LIABILITIES IS 500.00

  DISTRIBUTION OF CASH
                                                  
                        LIAB          IST PARTNER     2ND PART       3RD PARTNER       TOTAL
                          500                                                                                                 500
 ist to receive                               10,000                                                                10,000
                                                     2000                 1000                                          3000
sub total             500                  12000                   1000                                         13500

 bal used share ratio                      250                       200              50                          500
 TOTAL         500                     12250                   2,200                 50                     14000
TAKE NOTE THAT ANY CASH TO BE DISTRIBUTED TO THE PARTNERS, THEY MUST FIRST APPLY THAT TO ANY  LOANS PAYABLE TO THEM BY THE FIRM


========================================================================
 PROBLEM:

THE FOLLOWING BALANCE SHEETS OF   GORIO ,    RUBEN,    LEVI ,   TRECY,  WITH 40%, 35%, 15%, 10%  SHARE RATIO.

CASH                               14,000
NON CASH                    357,700
   ACCOUNTS PAYABLE                               13,600
LOANS PAYABLE  GORIO                            25,000
LOANS PAY      RUBEN                                42000
GORIO CAP                                                   84000
 RUBEN                                                          90000
LEVI  CAP                                                     75000
TRECY CAP                                                  42100
TOTAL                       371700                        371700

REQUIRED:
CASH OF 53.000  IS AVAILABLE TO CREDITORS AND PARTNERS. PREPARE CASH PRIORITY PROGRAM.
                                   CASH PRIORITY PROGRAM

                                            GORIO         RUBEN              LEVI           TRECY
CAPITAL                             84000            90,000                  75000         42100
LOANS                                  25000          42000
TOTAL                               109000           132000                  75000         42100
ABSORPTION  ABILITy   272500         377142                 500,000        421000

BETWEEN levi and trecy                                                      79,000  x 15%            11850
total                                   272500           377142                 421000         421000
between levi and rub                                                              43858    X15%           6578.70
between trecy and rube                                                                            43858 x 10%       4,385.8
balance                          272500           377142                  377142        377142
between levi and gorio                                                         104642   x 15            15696.30
between trecy and                                                                                104642x 10%      10464.20
between ruben and gorio                       104642 x35%                                                                   36624.7
balances                         272500            272500                272500         272500

                                            
          for LEVI                     11,850,  7578.70   .   15606.40                                34125
          FOR TRECY                             4358.80,  `10464.20                                            14850
           FOR RUBEN                                                            36624.70                                         36624.7

TOTAL  AMOUNT OF 85,599.70, IS THE AMOUNT  OF CASH OUTLAY FOR THE THREE PARTNERS IN CASE A CASH IS AVAILABLE FOR DISTRIBUTION.  of course from the available cash , the liabilities for outsider must be deducted to arrive at the cash available for distribution..  in the even that  THE CASH AVAILABLE less liabilities IS LESSER THAN 85,599.70.  of course apply first the share of the FIRST PARTNER, IF STILL SUFFICIENT TO COVER THE  SECOND PRIORITY ,APPLY  THAT AMOUNT, IF NOT SUFFICIENT , THEN APPLY THEIR SHARING RATIO OF WHOEVER IS ENTITLED ON THE REMAINING OF THE CASH FOR DISTRIBUTION..

using the data given.

                              LIAB.       LOAN                 LEVI         TRECY         RUBEN            
                                              RUBEN
FULL                   13600                                                                                         13600                    
LEVI ONLY                                                      11850                                           11850
LEVI AND TRECY                                           7578.70    4358.80                      11937.50
balance PRO RATA             9107.29                 3903.12      2602.09                     15612.50

TOTAL                 13600    9107.29                  13903.12   14823.00                    53000

TAKE NOTE THAT ON THE THIRD TRANCE , THE BALANCE LEFT TO DISTRIBUTE IS ONLY 15,612.50 WHILE ON THE PROGRAM , STILL THERE IS 36624.70.   THE 15612.70 MUST BE SHARED BASED ON THE SHARE RATIO OF THE THREE PARTNERS.

ruben               35/60 =    58.33%  X 15612.70 = 9107.29
levi                  15/60       25%                           -=3903.12
TRECY          10/60  = 16.67%                         = 2602.09
RUBEN WILL NOT SHARE UNTIL THE CASH TO DISTRIBUTE REACHED 85,599.70, GORIO WILL HAVE A SHARE ONLY IN EXCESS OF 85599.70
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

ANOTHER PROBLEM

bLANCE sheet of   ADOR, ANTON,  ABEL,  AMABLE,  SHARING 40% , 35%, 15%,10%.

THE TRIAL BALANCE

  cash                                    31,000
 other assets                          441,500
          accts. payable                              45,000
          loans ADOR                                30,000
          LOAN  ANTON                        50,000
         ador capital                                    100,000
         anton cap                                         107500
           abel                                              90000
            amable                                        50,000

1.   prepare cash priority schedule.
2.   in  case cash of 123,500 is available , show the distribution.
=================================================================
 ANOTHER PROBLEM TO SOLVE

 THE FOLLOWING DATA  FOR   ARTHUR,    BEN,     CARLOS,     FIRM  share ratio of 5,3,2

                       ARTHUR DRAWING  DEBIT BALANCE                          16000
                       BEN DRAWING CREDIT                                                   7000
                      CARLOS  DRAWING DEBIT                                             6000
                      LOANS PAYABLE BEN                                                     20,000
                     ARTHUR CAP                                                                      82,000
                      BEN CAP                                                                              60,000
                      CARLOS CAP                                                                    72,000

ON THIS DATE THE TOTAL ASSETS INCLUDING CASH IS 319,000.00 , THE NON CASH WAS SOLD AT 231,500.   FINALLY BEN RECEIVED 71,250.00  BASE ON LIQUIDATION STATEMENT .

required:
 1. compute  each partners equity
2.  compute total loss on realization
3. compute non cash assets
4. compute cash balance before the sale
5. compute outsider liabilities.

SOLUTION:

1.    THE EQUITY OF PARTNERS COMPOSED OF
         .   HIS CAPITAL......................................................................
              PLUS:  CREDIT BAL OF DRAWING................................
                          LOANS PAYABLE TO HIM................................
               LESS: DEBIT BALANCE OF DRAWING...................
                          ADVANCES /RECEIVABLE FROM HIM
                                 HIS EQUITY...........................................................


 2.  LOSS ON REALIZATION:

       IF   BEN RECEIVED 71,250 AND HIS EQUITY BEFORE DISTRIBUTION IS 87000, THT MEANS 15,750 IS HIS SHARE ON THE LOSS ON REALIZATION , IF HIS PROFIT SHARE IS 30% THEREFORE  15,750 DIVIDE 30% = 52,500 AS THE TOTAL LOSS OF THE REALIZATION/

FINAL CASH TO BE RECEIVED                            71,250
ADD:  HIS SHARE ON LOSS REALIZATION         15750
IF HIS SHARE RATIO IS 30% , THEN DIVIDE     15750 BY     30% = 52,500 AS LOSS.

5.  IF THE TOTAL  EQUITY IS        219,000 AS COMPUTED IN NO. 1
     TOTAL ASSETS IS                      319,000  GIVEN
THEREFORE                                     100.000 IS THE OUTSIDE LIABILITIES
  THIS COMPUTED USING THE BALANCE SHEET OR ACCOUNTING EQUATION

     CAPITAL  LESS ASSETS  =  LIABILITIES/

3. IF THE CASH FOR DISTRIBUTION IS       231,500 GIVEN
   THE LOSS ON SALES IS                                52,500
  THEREFORE  NON CASH ASSETS IS         284,000

      note : if you have cash after you sell , and that cash is less than the value of  that asset that means you sell at a loss.  see this formula:

              SALES                                      231,500
             LESS OF THE ITEMS SOLD   (   ?      )      USE SIMPLE ARITHMETIC
               LOSS                                         52,500                       
  
4.  IF THE NON CASH ASSETS IS                  284,000
  AND THE TOTAL ASSETS IS                        319,000 GIVEN
           BEGINNING CASH                                  35,000
\

=====================================================================


PROBLEM:

 A,  B,  C  PARTNERS SHARING 48%, 32%, 20% WITH CAPITAL AS FF:

                                                          CAPITAL      LOANS
        A                                             76,320             60,000
        B                                            64,480              20,000
        C                                            51,400              26,200

CASH AVAILABLE IS 27,600.00 , REMAININS ASSETS IS 270,800.

REQUIRED :
 1.  CASH PRIORITY PROGRAM

                   A                     B                 C        TOTAL             C             A
              76320            64480              51400  
              60000              20000            26200
           136320            84480               77600
            48%                   32%                20%
           284000           264000             388000
                                                           104,000  X20%           20,800
           284000          264000              264000
             20000                                                   X 48%                           9600
           264000             264000           264000                        20800        9600


CASH DISTRUTION:

                                      A              B                     C                     TOTAL
IST                                                                    20800                 20800
2ND                              4800                            2000                     6800
TOTAL                          4800                          22800                   27600
================================================================


PROBLEM:

 TOBY,   TONY,   TOM   shares profit  30%,  20%,  50%, with the ff:

         CASH          22500                          LOANS    TOBY      15000
      NON CASH 187500                           LOANS   TONY       7500
                                                                  LOANS  TOM          7500
                                                                   CAP   TOBY          30000
                                                                               TONY        75000
                                                                                TOM          45000


the following had transpired
                                          SALES                                  LIQ. COST     LIAB. PAID
                        BOOK VALUE      PROCEEDS
SEPT                  37500                  22500                         2500                    20000
OCT                   45000                 30000                          3000                    10000
NOV               105000                   52500                          4000


     REQUIRED  : SCHEDULE OF SAFE PAYMENT AND LIQUIDATION SCHEULE

                                       SAFE PAYMENT

                                                                TOBY         TONY                  TOM
 CAP                                                       30,000      75000                    45000
LOANS                                                  15000      7500                       7500
TOTAL                                                   45000    82500                     52500         180000
non cash assets less liabilities                    47250      31500                     78750       157,500
available cash                                         (2,250)    51000                      (26,250)       22500
                                                               2250       28500                       26250
balance                                                     0            22500                        0              22500


                                                  LIQUIDATION

cash       non cash                    liab.             TOBY               TONY       TOM                                        
22500    187500                   30000            45000            82500          52500
20,000)                                 20000)                                                                     PAY liab.                                                   
22500     37500                                           4500              3000            7500        loss on sale
(2500)                                                        750                  500               1250      liq. exp
22500)                                                                              (  22500                       pay TONY    
0             150000                 10000       39750                      56500      43750    BALANCE
30000      45000                                         4500                3000               7500    LOSS SALE
3000)                                                         900                    600               1500    LIQ. EXP
10000)                                10000                                                                       PAY LIAB.
17000    105000                    0              34350                 52900           34750       LOSS SALE
52500    105000                                    15750                    10500         26250   BALANCE
4000   )                                                   1200                       800             2000   LIQ. EXP
=================================================================
65500         0                           0           17400                   41600            6500    BALANCE OF CAP.

======================================================================
THE REMAINING  IS BROKEN DOWN  TO EACH PARTNER.  THOUGH TONY HAD ALREADY RECEIVED HIS SHARE AT THE ONSET OF  THE PROCESS OF LIQUIDATION ON THE BASIS OF THE SAFE PAYMENTS SCHEDULE .   HE WAS GIVEN THE FIRST TO RECEIVE THE CASH BEFORE LIQUIDATION BECAUSE HIS CAPITAL SURVIVE THE TEST ON THE ASSUMPTION THAT THE WHOLE NON CASH ASSETS WILL BE SOLD AT A LOSS.  HE WAS THE ONLY ONE TO SURVIVE BECAUSE THE REST BECOMES DEFICIENT AT THE EARLY STAGE.