Turner, Roth, and Lowe are partners who share income and loss in a 2:3:5 ratio. After...

Turner, Roth, and Lowe are partners who share income and loss in a 2:3:5 ratio. After lengthy disagreements among the partners and several unprofitable periods, the partners decide to liquidate the partnership. Immediately before liquidation, the partnership balance sheet shows total assets, $164,400; total liabilities, $110,000; Turner, Capital, $5,700; Roth, Capital, $15,600; and Lowe, Capital, $33,100. The cash proceeds from selling the assets were sufficient to repay all but $44,000 to the creditors. Required: a. Calculate the loss from selling the assets. b. Allocate the loss from part a to the partners. c. Determine how much, if any, each partner should contribute to the partnership to cover any remaining capital deficiency.

Solutions

Expert Solution

given data

total assets (book value) = 164400

total liabilities before liquidation = 110000

liability towards the creditors = 44000

partners sharing ratio = 2 : 3: 5

a) calculate the loss from selling the asset :

particulars	amount
liabilities tbefore liquidation	110000
less : cash received from selling the asset (110000 - 44000)	(66000)

remaining liability towards the creditors	44000

cash received from sale of asset	66000
less : book value of asset	(164400)

loss from sale of asset	($ 98400)

b) allocation of loss from sale of assets between partners :

particulars	turner	roth	lowe
profit sharing ratio	2 / 10	3 / 10	5 / 10
*loss allocation (98400 ratio)**	19680	29520	49200

c) contribution of capital deficiency by each partner :

particulars	turner	roth	lowe	total
opening capital balance	5700	15600	33100	54400
less : loss allocation	(19680)	(29520)	(49200)	(98400)

remaining capital balance	(13980)	(13920)	(16100)	(44000)

ekkarill92 answered 1 year ago

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