Dill and Edy form a partnership. Edy%u2019s capital contribution is $10,000, and

Question

Dill and Edy form a partnership. Edy%u2019s capital contribution is $10,000, and Dill%u2019s is $15,000. The partnership agreement provides that profits are to be shared, with 40 percent for Edy and 60 percent for Dill. Later, Edy makes a $10,000 loan to the partnership when it needs working capital. When the partnership is dissolved, its assets are $50,000, and its debts are $8,000. How should the assets be distributed? Be very specific as to the order of who gets paid what amounts when and why.

Explanation / Answer

Hi,

Please find the answer as follows:

The net assets of 42000 (50000 - 8000) will be distributed among the partners as follows:

Edy = 10000 (towards loan)

Dill = (42000 - 10000)*15000/(150000 + 10000) = 19200

Edy = (42000 - 10000)*10000/(150000 + 10000) = 12800

Total Amount Received by Edy = 10000 + 12800 = 22800

Total Amount Received by Dill = 19200

Thanks.

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