Turner, Roth, and Lowe are partners who share income and loss in a 1:4:5 ratio.

Question

Turner, Roth, and Lowe 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, $101,000; total liabilities, $75,750; Turner, Capital, $1,000; Roth, Capital, $7,250; and Lowe, Capital, $17,000. The cash proceeds from selling the assets were sufficient to repay all but $23,000 to the creditors. (a) Calculate the gain (loss) from selling the assets. (b) Allocate the gain (loss) to the partners. (Do not round intermediate calculations. Losses and deficits should be indicated with a minus sign.) (c) Determine the amount of the remaining liability to be paid by each partner. (Do not round intermediate calculations.)

Explanation / Answer

Answer a. Calculate Gain (Loss) on Selling the Assets Total Book Value of Assets          101,000 Total Liabilities (before liquidation)          75,750 Total Liabilities remaining after paying proceeds of assets sales to creditors          23,000 Cash Proceeds from sale of assets            52,750 Profit / (Loss) on sale of Assets          (48,250) Answer b. Turner Roth Lowe Balances prior to Liquidation            1,000               7,250           17,000 Profit / (Loss) on sale of Assets (1:4:5)          (4,825)          (19,300)         (24,125) Balance          (3,825)          (12,050)           (7,125) Answer C Amount to be Paid by each Partner Turner Roth Lowe Total Amt. to be Paid            3,825            12,050              7,125      23,000

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