Question

Turner, Roth, and Lowe are partners who share income and loss in a 1:4:5 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, $135,600; total liabilities, $86,000; Turner, Capital, $3,300; Roth, Capital, $14,400; and Lowe, Capital, $31,900. The cash proceeds from selling the assets were sufficient to repay all but $32,000 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.

Answer 1

a)

Liabilities before liquidation	$    86,000.00
Proceeds from sale of assets(Paid to creditors)	$    54,000.00
Remaining Liabilities	$    32,000.00
Proceeds from sale of assets	$    54,000.00
Book Value of assets sold	$ 135,600.00
Loss on Sale of assets	$ (81,600.00)

b)

	Turner	Roth	Lowe	Total
Initial Capital Balance	$      3,300.00	$   14,400.00	$   31,900.00	$   49,600.00
Allocation of gain (losses)	$   (8,160.00)	$ (32,640.00)	$ (40,800.00)	$ (81,600.00)
Capital balances after gain (loss)	$   (4,860.00)	$ (18,240.00)	$   (8,900.00)	$ (32,000.00)

c)

	Turner	Roth	Lowe	Total
liabiities to be paid by Partner	$   (4,860.00)	$ (18,240.00)	$   (8,900.00)	$ (32,000.00)