Distribution of Cash Upon Liquidation
Pryor and Lester are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their capital balances are $18,000 and $12,000, respectively. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $23,000.
a. What is the amount of a gain or loss on realization?
Gain or Loss | |
Amount | $ |
b. How should the gain or loss be divided between Pryor and Lester?
Pryor | ||
Lester |
c. How should the cash be divided between Pryor and Lester? If an amount is zero, enter "0".
Lester and Pryor | ||
Distribution of Cash | ||
Pryor | Lester | |
Capital balances before realization | $ | $ |
Division of gain or loss on realization | ||
Balances | $ | $ |
Cash distributed to partners | ||
Final balances | $ | $ |
a.
Cash Balance............................................$23,000
Capital Balances($18,000+$12,000)...........$30,000
Loss.............................................................($7,000)
b.Because they are sharing profit and losses equally
Pryor($8,000/2) | $3,500 |
Lestor($8,000/2) | $3,500 |
c.
Distribution Of cash | |||
Pryor | Lestor | ||
Capital Balances before realization | $18,000 | $12,000 | |
Division of gain or loss on realization | $3,500 | $3,500 | |
|
$14,500 | $8,500 | |
Cash distributed to partners | $14,500 | $8,500 | |
Final Balances | $0 | $0 |
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