Question

Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Everett, $54,400 Cr.; Miguel, $46,500 Dr.; and Ramona, $34,700 Cr. How much cash is available for distribution to the partners?

a.$42,600

b.$135,600

c.$89,100

d.$7,900

Answer 1

Capital Everett = $54,400 credit

Capital Miguel = $46,500 debit

Capital Ramona = $34,700 credit

After selling all assets for cash, dividing loss on realization and paying liabilities, cash balance must be equal to the final balance in capital account of the partners.

Total capital account balance = Capital Everett (Credit) - Capital Miguel (Debit) + Capital Ramona (Credit)

= 54,400-46,500+34,700

= $42,600

Hence, cash available for distribution to the partner = $42,600

Correct option is a.

Kindly comment if you need further assistance. Thanks