EX 12-19 Distribution of cash upon liquidation

Lyle and Fisher are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their capital balances are $15,000 and $7,000, respectively. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $16,000.

a. What is the amount of a gain or loss on realization?

b. How should the gain or loss be divided between Lyle and Fisher?

c. How should the cash be divided between Lyle and Fisher?

Answer:

a.    Cash balance ................................................. $16,000  Sum of capital accounts...............................  22,000  Loss from sale of noncash assets............... $ 6,000   
b. and c.  Lyle  Fisher   Capital balances before realization.............. $15,000 $7,000  Division of loss on sale of noncash assets   3,000*  3,000*  Balances......................................................... $12,000 $4,000  Cash distributed to partners.........................  12,000  4,000  Final balances................................................ $ 0 $ 0   *$6,000/2

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