Exercise D-10 Liquidation of partnership LO P4 Turner, Roth, and Lowe are partne

Question

Exercise D-10 Liquidation of partnership LO P4 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, $106,000; total liabilities, $79,500; Turner, Capital, $1,900; Roth, Capital, $13,775, and Lowe, Capital, $10,825. The cash proceeds from selling the assets were sufficient to repay all but $28,000 to the creditors. (a) Calculate the gain (loss) from selling the assets Liabilities before liquidation Proceeds from sale of assets (paid to creditors) Remaining liabilities Proceeds from sale of assets Book value of assets sold (b) Allocate the gain (loss) to the partners. (Do not round intermediate calculations. Losses and deficits should be indicated with a minus sign.) Turner Roth $ 13,775 Lowe Total Initial capital balances Allocation of gains (losses) Capital balances after gains (losses) $ 1,900 S 10,825 $ 26,500

Explanation / Answer

Req a: Liabilities before liquidation 79,500 Proceeds from sale of assets 51,500 Remaining liabilities 28000 Proceeds from sale of assets 51500 Book value of assets sold 106000 Loss on selling the assets -54500 Req b: Allocation of Loss on sale of assets Turner Roth Lowe Total Initial Capital balances 1900 13775 10,825 26,500 Less: Lloss on sale of assets -5450 -21800 -27250 -54500 (in the ratio of 1:4:5) Capital balance after losses -3550 -8025 -16425 -28000 Note: The capital balances is having debit balance(i.e. negative) and is also equal to $ 28,000. i.e. the defiiciency for the liabilities to be paid off. Therefore, the partners must bring such balances to pay off the liabilities Req C: Turner Roth Lowe Total Liabilities to be paid by partners 3550 8025 16425 28000

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.