Tuttle, Ritter, and Lee are partners who share income and loss in a 1:4:5 ratio.
ID: 2357243 • Letter: T
Question
Tuttle, Ritter, and Lee are partners who share income and loss in a 1:4:5 ratio. After lengthy disagreements among the partners and several unprofitable periods, the partners decide to liquidate the partnership. Immediately before liquidation, the partnership balance sheet shows total assets, $116,000; total liabilities, $88,000; Tuttle, Capital, $1,200; Ritter, Capital, $11,700; and Lee, Capital, $15,100. The cash proceeds from selling the assets were sufficient to repay all but $24,000 to the creditors.
Allocate the loss to the partners.(Losses should be indicated by a minus sign. Omit the "$" sign in your response.)
Determine how much of the remaining liability should be paid by each partner.(Input all amounts as positive values. Omit the "$" sign in your response.)
Tuttle, Ritter, and Lee are partners who share income and loss in a 1:4:5 ratio. After lengthy disagreements among the partners and several unprofitable periods, the partners decide to liquidate the partnership. Immediately before liquidation, the partnership balance sheet shows total assets, $116,000; total liabilities, $88,000; Tuttle, Capital, $1,200; Ritter, Capital, $11,700; and Lee, Capital, $15,100. The cash proceeds from selling the assets were sufficient to repay all but $24,000 to the creditors.
Explanation / Answer
Calculate the loss from selling the assets.
Total Liabilities = $88000
However, $24000 of liabilities are not settled.
Thus, liabilities settled = 88000 - 24000 = $64000
Assets book value = $116000
Loss on sale of asset = 116000 - 64000 = $52000
Allocate the loss to the partners.
Tuttle: 1/10 x 52000 = $5200
Ritter: 4/10 x 52000 = $20800
Lee: 5/10 x 52000 = $26000
Remaining liability
Tuttle: 5200 - 1200 = $4000
Ritter: 20800 - 11700 = $9100
Lee: 26000 - 15100 = $10900
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