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The Muneer, Majid, and Mahmood partnership had two assets: (1) cash of RO 120,000 and (2)...

The Muneer, Majid, and Mahmood partnership had two assets:


(1) cash of RO 120,000 and

(2) an investment with a book value of RO 330,000. The ratio for sharing profits and losses is 6:3:3. The balances in the capital accounts were:

Muneer, capital: RO 45,000
Majid, capital: RO 75,000
Mahmood, capital: RO 30,000

Required:
If the investment was sold for RO 240,000, how much cash would each partner have received?

Solutions

Expert Solution

Muneer, Majid and Mahmood
Statement for cash would each partner have received:
Amount in RO
Particulars Cash + Investment= Retained earnings (Profit & Loss)    + Capital Muneer (6/12)+ Capital Majid (3/12)+ Capital Mahmood (3/12)
Opening Balances          1,20,000                   3,30,000                      3,00,000                          45,000                          75,000                          30,000
Sales of investment and loss (Refer note-1)          2,40,000                 (3,30,000)                                   -                         (45,000)                       (22,500)                       (22,500)
Balances after sale of investment          3,60,000                                -                        3,00,000                                   -                            52,500                            7,500
Distribute the retained earning (Refer note-2)                       -                                  -                      (3,00,000)                      1,50,000                          75,000                          75,000
Balances after retained earnings          3,60,000                                -                                     -                        1,50,000                      1,27,500                          82,500
Cash distributed to partners (Refer note-3)        (3,60,000)                                -                                     -                      (1,80,000)                       (90,000)                       (90,000)
Final balances (Refer note-4)                       -                                  -                                     -                         (30,000)                          37,500                          (7,500)
Note-1: Investment sold in cash RO 2,40,000 and remaining loss RO 90,000 distributed in partner's capital account in the ratio of (6:3:3).
Note-2: It is assume that in liabilities side the balance of retained earnings RO 3,00,000 other than partner's capital. Retained earning is distributed in partner's capital account in the ratio of (6:3:3).
Note-3: Cash RO 3,60,000 distributed in partner's capital account in the ratio of (6:3:3).

Note-3: As per ratio, Capital deficiency of Muneer & Mahmood, however Majid positively, in this way if cash distribute as per balance amount, here no found deficiency and all account is NIL. Otherwise Cash RO 30,000 & RO 7,500 will be brought by Muneer & Mahmood.

General Note: If liability side retained earning is not taken only their side partner's capital is considered than As per ratio, Capital deficiency of Muneer, Majid & Mahmood is coming, in this way Cash RO 1,80,000 & RO 37,500 and RO 82,500 will be brought by Muneer, Majid & Mahmood.

ekkarill92 answered 1 year ago
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