Bracken, Louden, and Menser, who share profits and losses in a ratio of 4:3:3, r

Question

Bracken, Louden, and Menser, who share profits and losses in a ratio of 4:3:3, respectively are partners in a home decorating business that has not been able to generate the income the partners had hoped for. They have decided to liquidate the business and have sold all assets except for their decorating equipment. All partnership liabilities have been settled and all the partners are personally insolvent. The decorating equipment has a book value of $58,000, and the partners have capital account balances as follows:

Determine the amount of cash each partner will receive as a liquidating distribution if the decorating equipment is sold for the amount stated in each of the following independent cases (Do not round intermediate calculations):

b. $33,000

Bracken, Louden, and Menser, who share profits and losses in a ratio of 4:3:3, respectively are partners in a home decorating business that has not been able to generate the income the partners had hoped for. They have decided to liquidate the business and have sold all assets except for their decorating equipment. All partnership liabilities have been settled and all the partners are personally insolvent. The decorating equipment has a book value of $58,000, and the partners have capital account balances as follows:

Explanation / Answer

Solution:

Answer a.

If the decorating equipment is sold for $42,000, as all partnership liabilities has been settled, so selling decorating equipment, the amount realised will be divided in their profit sharing ratio 4:3:3
Bracken = 4/10 of 42,000 = $16,800
Lauden = 3/10 of $42,000 = $12,600
Menser = 3/10 of $42,000 = $12,600

Answer b.

If the decorating equipment is sold for $33,000, as all partnership liabilities has been settled, so selling decorating equipment, the amount realised will be divided in their profit sharing ratio 4:3:3
Bracken = 4/10 of $33,000 = $13,200
Lauden = 3/10 of $33,000 = $9,900
Menser = 3/10 of $33,000 = $9,900

Answer c.

If the decorating equipment is sold for $19,000, as all partnership liabilities has been settled, so selling decorating equipment, the amount realised will be divided in their profit sharing ratio 4:3:3
Bracken = 4/10 of $19,000 = $7,600
Lauden = 3/10 of $19,000 = $5,700
Menser = 3/10 of $19,000 = $5,700

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