Question

In: Accounting

Bracken, Louden, and Menser, who share profits and losses in a ratio of 4:3:3, respectively are...

Bracken, Louden, and Menser, who share profits and losses in a ratio of 4:3:3, respectively are partners in a home decorating business that has not been able to generate the income the partners had hoped for. They have decided to liquidate the business and have sold all assets except for their decorating equipment. All partnership liabilities have been settled and all the partners are personally insolvent. The decorating equipment has a book value of $58,000, and the partners have capital account balances as follows:
  
  Bracken, capital $ 37,600
  Louden, capital 6,800
  Menser, capital 13,600
Required:

Determine the amount of cash each partner will receive as a liquidating distribution if the decorating equipment is sold for the amount stated in each of the following independent cases (Do not round intermediate calculations):
a. $42,000.
Capital Balances
Bracken Louden Menser
Final distribution of cash

b. $33,000

Capital Balances
Bracken Louden Menser
Final distribution of cash
c. $19,000.
Capital Balances
Bracken Louden Menser
Final distribution of cash

Solutions

Expert Solution

a.

Capital Balances
Bracken Louden Menser
Capital balances before sale of equipment 37600 6800 13600
Loss on sale of equipment $16000 (4:3:3)* -6400 -4800 -4800
Capital balances after sale of equipment 31200 2000 8800
Final distribution of cash 31200 2000 8800

*Loss on sale of equipment = $42000 - $58000 = $16000

b.

Capital Balances
Bracken Louden Menser
Capital balances before sale of equipment 37600 6800 13600
Loss on sale of equipment $25000 (4:3:3)* -10000 -7500 -7500
Capital balances after sale of equipment 27600 -700 6100
Allocation of Louden's deficit (4:3) -400 700 -300
New capital balances 27200 0 5800
Final distribution of cash 27200 0 5800

*Loss on sale of equipment = $33000 - $58000 = $25000

c.

Capital Balances
Bracken Louden Menser
Capital balances before sale of equipment 37600 6800 13600
Loss on sale of equipment $39000 (4:3:3)* -15600 -11700 -11700
Capital balances after sale of equipment 22000 -4900 1900
Allocation of Louden's deficit (4:3) -2800 4900 -2100
New capital balances 19200 0 -200
Allocation of Menser's deficit -200 0 200
Final distribution of cash 19000 0 0

*Loss on sale of equipment = $19000 - $58000 = $39000

ekkarill92 answered 1 year ago
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