Question

Cash $95,000 Non-cash assets 200,000 Liabilities 50,000 Partner 1 Capital 125,000 30% Partner 2 Capital 120,000...

Cash $95,000

Non-cash assets 200,000

Liabilities 50,000

Partner 1 Capital 125,000 30%

Partner 2 Capital 120,000 40%

Partner 3 Capital (20,000) 30%

Liquidation expense 10,000

Made $0 profit on non cash assets

What would be the maximum amount a partnership would have to contribute to the partnership to eliminate a deficit balance in his account?

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Answer #1

Computation of Surplus amount available for distribution to partners:

Cash available = $ 95000

sale proceeds of non cash assets = $ 200000 (equal to book value, since it is given that the assets are sold at no profit no loss)

Liquidation expenses = $10000

Amount payable for liabilities = $ 50000

Therefore, Surplus Amount available for distribution to partners = 95000 + 200000 - 10000 - 50000

= $ 235000

Share of each partner in the Surplus amount:

Partner 1 (30%) : 70500

Partner 2 (40%) : 94000

Partner 3 (30%) : 70500

Negative balance in Partner 3 capital : (20000)

Conclusion:

Since the share in surplus amount available (70500) is more than negative balance (20000) in the account, Partner 3 is not required to contribute even a single cent and rather, he is entitled for excess amount available after setting off the negative balance to his account i.e., 70500 - 20000 = 50500.

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