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

$19,000.

	Capital Balances
	Bracken	Louden	Menser
Final distribution of cash

Solutions

Expert Solution

	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

	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

	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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