Question
In: Accounting
Bracken, Louden, and Menser, who share profits and losses in a ratio of 4:3:3, respectively are...
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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. |
|
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b. $33,000
| Capital Balances | |||
| Bracken | Louden | Menser | |
| Final distribution of cash | |||
| c. | $19,000. | |||||||||||
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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 agoRelated Solutions
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