A local partnership has only two assets (cash of $10,000 and land with a cost of
ID: 2361517 • Letter: A
Question
A local partnership has only two assets (cash of $10,000 and land with a cost of $35,000). All liabilities have been paid and the following capital balances are currently being recorded. The partners share profits and losses as follows. All partners are insolvent.Brown, capital (40%) $25,000
Fish, capital (30%) 15,000
Stone, capital (30%) 5,000
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(a) If the land is sold for $25,000, how much cash does each partner receive in a final settlement?
Explanation / Answer
Brown (40%)
25,000
Fish (30%)
15,000
Stone (30%)
5,000
10,000*.4
(4,000)
10,000 * .3
(3,000)
10,000*.3
(3,000)
25000-4000
21,000
15000-3000
12,000
5000-3000
2000
25,000*.4
10,000
25,000*.3
7,500
25,000*.3
7,500
21,000+10,000
31,000
12,000+7,500
19,500
2,000+7,500
9,500
Share of Loss (35-25=10k)
Balance in Capital
Cash from Sale of Land
End Balance in Capital Accounts
Cash Distribution: 31,000 + 19,500 +9,500 = 60,000
Cash to be distributed: 10,000 + 25,000 = 35,000
Brown: 31,000/60,000 = .517 (rounded) * 35,000= $ 18,095
Fish: 19,500/60,000 = .325 * 35,000 = $11,375
Stone : 9,500/60,000 = .158 (rounded) * 35,000 = $5,530
Brown (40%)
25,000
Fish (30%)
15,000
Stone (30%)
5,000
10,000*.4
(4,000)
10,000 * .3
(3,000)
10,000*.3
(3,000)
25000-4000
21,000
15000-3000
12,000
5000-3000
2000
25,000*.4
10,000
25,000*.3
7,500
25,000*.3
7,500
21,000+10,000
31,000
12,000+7,500
19,500
2,000+7,500
9,500
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