Question

Turner, Roth, and Lowe are partners who share income and loss in a 2:3:5 ratio (in percents: Turner, 20%; Roth, 30%; and Lowe, 50%). The partners decide to liquidate the partnership. Immediately before liquidation, the partnership balance sheet shows total assets, $133,200; total liabilities, $84,000; Turner, Capital, $3,100; Roth, Capital, $14,300; and Lowe, Capital, $31,800. Cash received from selling the assets was sufficient to repay all but $31,000 to the creditors. Required: a. Calculate the loss from selling the assets. b. Allocate the loss from part a to the partners. c. Determine how much each partner should contribute to the partnership to cover any remaining capital deficiency.

Answer 1

Answer:

given data

total assets (book value) = 133200

total liabilities before liquidation = 84000

liability towards the creditors = 31000

partners sharing ratio = 2 : 3: 5

a) calculate the loss from selling the asset :

particulars	amount
liabilities before liquidation	84000
less : cash received from selling the asset (84000 - 31000)	(53000)
remaining liability towards the creditors	31000
cash received from sale of asset	53000
less : book value of asset	(133200)
loss from sale of asset	($ 80200)

b) allocation of loss from sale of assets between partners :

particulars	turner	roth	lowe
profit sharing ratio	2 / 10	3 / 10	5 / 10
loss allocation (80200 * ratio)	16040	24060	40100

c) contribution of capital deficiency by each partner :

particulars	turner	roth	lowe	total
opening capital balance	3100	14300	31800	49200
less : loss allocation	(16040)	(24060)	(40100)	(80200)
remaining capital balance	(12940)	(9760)	(8300)	(31000)