Question

Turner, Roth, and Lowe are partners who share income and loss in a 1:4:5 ratio (in percents: Turner, 10%; Roth, 40%; and Lowe, 50%). The partners decide to liquidate the partnership. Immediately before liquidation, the partnership balance sheet shows total assets, $140,400; total liabilities, $90,000; Turner, Capital, $3,700; Roth, Capital, $14,600; and Lowe, Capital, $32,100. Cash received from selling the assets was sufficient to repay all but $34,000 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

Ans: data given

total assets(book value)=$140,400

total liabilities before liquidation=$90000

Liability towards creditors=34000

Partners sharing ratio=1:4:5 (turner: roth: lowe)

A), Calculate the loss from Selling the assets

Particulars	Amount
Liabilities before liquidation	90000
Less: cash received from selling the asset(90000-34000)	(56000)
Remaining liabilities towards creditors	34000
Cash received from selling the assets	56000
Less: book value of asset	(140400)
Loss from sale of assets	$16400

B). Allocation of loss from Sale of assets between partners

Particulars	Turner	Roth	Low
Initial capital balances	3700	14600	32100
Less: Allocation of capital**	1640	6560	8200
Capital balances after losses	2060	8040	23900

** total loss=16400

partner wise share: tuner= 1/10*16400=1640

Roth=4/10*16400=6560

Lowe=5/10*16400=8200

C). Contribution of capital deficiency by each partner to the partnership

Tuner-2060

roth-8040

Lowe- 23900

Total-$34000