650 Chapter 14 . Partnership Accounting and Reporting LO 6 E14.13 Rights of Cred

Question

650 Chapter 14 . Partnership Accounting and Reporting LO 6 E14.13 Rights of Creditors The following are data for the AB Partnership and for A and B as individuals. Assume that A and B are equal partners. AB Partnership Cash.... Liabilities.. Capital-A. Capital-B .... Partner A Cash. Case 1 $48,000 42,000 3,000 3,000 Case 2 $31,000 51,000 (8,000) (12,000) Liabilities. ...... 10,000 30,000 17,000 Partner B 17,000 Cash. Liabilities... 50,000 9,000 15,000 16,000 Required For each case, indicate how the assets of the partnership and the assets of each partner are applied if credi- tor claims are satisfied as fully as possible. LO 6 E14.14 Safe Paum

Explanation / Answer

In case I

Since the firm is having sufficent cash balance to pay off its liabilities, The liability of Rs. 42000 will be paid off by its Cash Balance.

In case II

Liabilities of the firm = 51000

Cash Balance of Firm = 31000

Liability remaining after the payment from cash balance is Rs. 20000 which is to be brought by the partners in equal ratio i.e 10000 each (As each partner is having sufficient amount of cash balance)

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