Question

The Apple, Banana, and Cucumber partnership began the process of liquidation. Their noncash assets have a balance of $434,000.  A, B, and C share profits and losses in a ratio of 3:2:5. If the noncash assets were sold for $134,000, which partner(s) would have been required to contribute assets to the partnership to cover a deficit balance?

Question 8 options:

	Apple
	Cucumber
	Banana
	Apple and Banana
	Apple and Cucumber

Answer 1

At the time of liquidation in partnership firm, the sale of assets may result in gain or losses which are distributed to partners capital accounts according to their profit sharing ratio. This may reduce partner's capital account to zero.

In this case, their non cash balance was $434,000 and they sold the assests for $134,000 which resulted in $300,000 of a loss to the partnership. They should contribute assets in the profit sharing ratio or according to the individual debts of the partners. Acccording to the given information and options, Cucumber and Apple should contribute assets to the partnership to cover a deficit balance.