Installment liquidation with deficit capital balances and personal insolvency. Twelve years ago, Adams, Boyd, and Chambers formed a partnership manufacturing small circuit boards. Unfortunately,...

Installment liquidation with deficit capital balances and personal insolvency. Twelve years ago, Adams, Boyd, and Chambers formed a partnership manufacturing small circuit boards. Unfortunately, foreign competition, a softening economy, and management errors have led the partners to realize that the company’s business cannot be sustained and that the partnership must be liquidated. A condensed balance sheet is as follows:

The current value of personal assets and liabilities of the partners, excluding those related to the partnership, are as follows:

Boyd is extremely concerned that after liquidation of the partnership they would still continue to be personally insolvent. This would be devastating to Boyd, and they have come to you

with their concerns.

Prepare a response to each of Boyd’s independent questions noting that profits and losses are allocated 40%, 20%, and 20% to Adams, Boyd, and Chambers, respectively.