Question

A partnership has liquidated all assets but still reports the following account balances:

Beck, loan	$	5,500
Cisneros, capital (40%)		3,600
Beck, capital (20%)		(12,200	)	(deficit)
Sadak, capital (10%)		(8,200	)	(deficit)
Emerson, capital (20%)		15,500
Page, capital (10%)		(6,200	)	(deficit)

The partners split profits and losses as follows: Cisneros, 40 percent; Beck, 20 percent; Sadak, 10 percent; Emerson, 20 percent; and Page 10 percent.

Assuming that all partners are personally insolvent except for Sadak and Emerson, how much cash must Sadak now contribute to this partnership?

Answer 1

Solution:

As given in Question

Cisneros, Beck and Page are personally insolvent. And, Cisneros has positive capital balance.

That means, after offsetting the loan of beck, total deficit will be:

= Beck Capital deficit + Pag Capital Deficit - Beck, Loan

= 12,200 + 6,200 - 5,500

= $12,900

Total Deficit will be distributed among Cisneros, Sadak and Emerson in their Profits and Losses split Percentage..

Now, as given in question, Cisneros is also personally insolvent, and after adjusting deficit his capital balance is also negative, So It will be distributed among Sadak and Emerson.

Therefore, Sadak must contribute $11,300 to this partnership.