Question

A partnership has liquidated all assets but still reports the following account balances

Beck, loan $6,700

Cisneros, capital (40%) 5,100

Beck, capital (20%) -8,300 (deficit)

Sadak, capital (10%) -9,700 (Deficit)

Emerson, capital (20%) 14,900

Page, capital (10%) -7,700 (Deficit)

The partners split profits and losses as follows: Cisneros, 40 percent, Beck, 20 percent; Sadak, 10 percent, Emerson, 20 percent, and Page 10 percent.

Assuming that all partners are personally insolvent except for Sadak and Emerson, how much cash must Sadak now contribute to this partnership? (Do not round intermediate calculations. Round the final answer to nearest dollar amounts.)

Answer 1

Ans-Beck and Page are both insolvent and have negative capital balances (after offsetting the loan from Beck) totalling $9,300( $8,300+$7,700-$6,700).Absorption by the other partners of these losses woulb be as follows( on a 40:10:20):

Partner	Share of loss	New Capital Balance
Cisneros	40/70*$9,300=$5,314	($214)
Sadak	10/70*9,300=$1,329	($11,029)
Emerson	20/70*$9,300=$2,657	$12,243

Cisneros , who is also insolvent now has a deficit capital of $214 that would have to be absorbed by Sadak and Emerson (on 10:20 basis):

Partner	Share of Loss	New Capital Balance
Sadak	10/30*$214=$71	($11,100)
Emerson	20/30*$214=$143	$12,100

Thus, Sadak must contribute $11,100 to this partnership.