A partnership has liquidated all assets but still reports the following account

Question

A partnership has liquidated all assets but still reports the following account balances:

The partners split profits and losses as follows: Black, 30 percent; White, 30 percent; Green, 10 percent; Brown, 20 percent; and Blue, 10 percent.

Assuming that all partners are personally insolvent except for Green and Brown, how much cash must Green now contribute to this partnership? (Do not round intermediate calculations.)

  Loan from White $ 6,500                  Black, capital 3,900                  White, capital (10,300 ) (deficit)   Green, capital (4,300 ) (deficit)   Brown, capital 17,500   Blue, capital (13,300 ) (deficit)

Explanation / Answer

In this case Black, white and Blue are insolvant. However Black have positive capital left So the loan will be distributed between Black, Green & Brown Loan 6500 Old capital New Amount Black 30% $     1,950 $   3,900 $       1,950 Green 10% $        650 $ (4,300) $     (4,950) Brown 20% $     1,300 $ 17,500 $     16,200 Green is now having the deficit capital which will be shared by black and Brown Black who is insolvant have positive capital This capital will be shared by green and brown Balance Green 33% $        650 $ (4,300) Brown 67% $     1,300 $ 17,500 Thus green must contribute 4300 that will go to brown

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