Ch 12-3 Exercises and Problems Distribution of Cash Upon Liquidation Hewitt and

Question

Ch 12-3 Exercises and Problems Distribution of Cash Upon Liquidation Hewitt and Patel are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their captal blances are $12,000 and $8,000, respectively. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $15,000. a. What is the amount of a gain or loss on realization? b. How should the gain or loss be divided between Hewitt and Patel? Hewitt Patel c. How should the cash be divided between Hewitt and Patel? If an amount is zero, enter "O". Hewitt and Patel Distribution of Cash Hewitt Patel Capital balances before realization Division of gain or loss on realization Balances Cash distributed to partners Final balances

Explanation / Answer

Total capital in the business=$12000+$8000=$20000

Realisations=$15000

Total loss on realisation=$20000-$15000=$5000

Hewitt and Patel should divide the loss equally, as their profit sharing ratio is 1:1

Thus, Hewitt=$2500

Patel=$2500

Distribution of Cash

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Capital balances before realisation $12000 $8000 Division of loss on realisation $2500 $2500 Balances $9500 $5500 Cash distribution to partners $9500 $5500 Final Balance Nil Nil

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