Question

In: Accounting

Carney, Pierce, Menton, and Hoehn are partners who share profits and losses on a 4:3:2:1 basis,...

Carney, Pierce, Menton, and Hoehn are partners who share profits and losses on a 4:3:2:1 basis, respectively. They are beginning to liquidate the business. At the start of this process, capital balances are

Carney, capital $ 78,000
Pierce, capital 32,400
Menton, capital 61,000
Hoehn, capital 25,400

Which of the following statements is true?

Multiple Choice

  • The first available $10,200 will go to Menton.

  • Carney will be the last partner to receive any available cash.

  • Carney will collect a portion of any available cash before Hoehn receives money.

  • The first available $7,400 will go to Hoehn.

I think the answer is: First available 10,200 will go to Menton, but I am not sure. Could you double check this answer is correct or incorrect.

Solutions

Expert Solution

Answer :

Statement showing distribution of surplus

S.No Particulars Carney Pierce Menton Hoehn
1 Capital balance 78000 32400 61000 25400
2 Orofit sharing ratio 4 3 2 1
3 Basis capital (1/2) 19500 10800 30500 25400
4 Required capital taking pierce basis capital (least) = 10800* profit sharing ratio (2)

43200

(10800*4)

32400

(10800*3)

21600

(10800*2)

10800

(10800*1)
5 Excess capital (1-4)

34800

(78000/43200)

 0 39400 14600
6 Basis capital (5/2)

8700

(34800/4)

 -

19700

(39400/2)

14600

(14600/1)
7 Required capital taking carney basis capital (least) = 8700*Profit sharing ratio (2) 34800 - 17400 8700
8 Excess capital (5-7) 0 - 22000 5900
9 Basis capital (8/2) - - 11000 5900
10 Required capital taking Hoehm basis capital (least) = 5900*profit sharing ratio (2) - -

11800

(5900*2)

5900

(5900*1)
11 Excess capital (8-10) - - 10200 0

So the first available 10200 to be given to Menton

ekkarill92 answered 1 year ago
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