In: Accounting
. ABC partners have capital balances and share profit and loss equally: A=$20,000, B=$15,000 and C = $65,000. During liquidation a $75,000 loss on non cash assets is suffered. How much will C eventually receive if:
A: All partners are solvent
B. B and C are solvent.
C. Only C is solvent. In this instance how much is C’s claim against A & B each?
Answer
A. | All the partners are solvent | ||||||
If all the partners are solvent, the loss has to be shared by the partners equally | |||||||
The loss can be shared as follows | |||||||
$ 75000 | |||||||
3 | $ 25000 | ||||||
So, Partner C will receive $ 40000 ($ 65000 - $25000) | |||||||
B. | B and C are solvent | ||||||
If only B and C are solvent, the loss has to be first adjusted with partner A's Capital and the balance can be shared by B and C equally | |||||||
The loss can be shared as follows | |||||||
$ 75000 can be first adjusted with Partner A' Capital. That is, | |||||||
$ 55000 ($ 75000 - $ 20000) | |||||||
The balance $ 55000 can be equally shared by B and C | |||||||
$ 55000 | |||||||
2 | $ 27500 | ||||||
So, Partner C will receive $ 37500 ($ 65000 - $27500) | |||||||
C. | Only C is solvent | ||||||
If only C is solvent, the loss has to be first adjusted with partner A's Capital and B's Capital and the balance can be shared by C | |||||||
The loss can be shared as follows | |||||||
$ 75000 can be first adjusted with Partner A' Capital and B's Capital. That is, | |||||||
$ 40000 ($ 75000 - ($ 20000+$ 15000) | |||||||
The balance $ 40000 can be shared by C | |||||||
So, Partner C will receive $ 25000 ($ 65000 - $40000) | |||||||