Question

Minden, Mel, and Montana decide to liquidate their partnership. All assets are sold, and the liabilities are paid. Following these transactions, the capital balances and profit and loss percentages are as follows: Minden, $27,000 and 30%; Mel, $(12,000) and 40%; Montana, $43,000 and 30%. Mel is unable to contribute any assets to reduce the deficiency. How much cash will Montana receive as a result of the partnership liquidation

Answer 1

Answer:

The amount of cash that will be received by Montana is $37000.

Explanation:  

                                                 Minden           Mel       Montana

Profit sharing ratio                                 30%             40%            30%

Balances                                                 27000       -12000    43000

Deficiency distrubuted                           -6000      12000    -6000

Cash received by partners                    21000           0            37000    

Minden and Montana have to contribute in their

profit sharing ratio (30% and 30%), i.e., equally.

Therefore, the amount of cash that will be received by Montana is $37000.