Question

Bianca Houston, Jana Alsup, and KeKe Cross arranged to import and sell orchid corsages for a university dance. They agreed to share equally the net income or net loss of the venture. Houston and Alsup advanced $870 and $1,320 of their own respective funds to pay for advertising and other expenses. After collecting for all sales and paying creditors, the partnership has $3,540 in cash.

Use the minus sign to indicate any deficiency for the capital accounts.

a. How should the money be distributed?

	Houston	Alsup	Cross	Total
Capital balances and cash distribution	$	$	$	$

b. Assume that the partnership has only $1,890 instead of $3,540. Do any of the three partners have a capital deficiency?
Yes or No ?

If so, how much?
$

	Houston	Alsup	Cross	Total
Capital balances

Answer 1

Requirement a

	Houston	Alsup	Cross	Total
Capital balances and cash distribution	$ 1,320.00	$    1,770.00	$ 450.00	$   3,540.00

Working

	Houston	Alsup	Cross	Total
Expenses paid	$     870.00	$    1,320.00		$   2,190.00
Payment for expenses	$   (870.00)	$ (1,320.00)		$ (2,190.00)
Balance in cash left				$   1,350.00
Distribution of remaining cash equally	$     450.00	$        450.00	$ 450.00	$   1,350.00
Total distribution to partners (expenses and remaining profit)	$ 1,320.00	$    1,770.00	$ 450.00	$   3,540.00

Requirement b

Yes

The partners will have deficiency

Cross will have deficiency of $100

	Houston	Alsup	Cross	Total
Capital balances	$     770.00	$    1,220.00	$    (100.00)	$   1,890.00

Working

	Houston	Alsup	Cross	Total
Expenses paid	$     870.00	$    1,320.00		$   2,190.00
Payment for expenses	$   (870.00)	$ (1,320.00)		$ (2,190.00)
Net deficiency (1890-2190)				$     (300.00)
Distribution of remaining cash equally	$   (100.00)	$      (100.00)	$    (100.00)	$     (300.00)
Total distribution to partners	$     770.00	$    1,220.00	$    (100.00)	$   1,890.00