Question

Harding, Jones, and Sandy, a partnership, is in the process of liquidating. The partners have the following capital account balances; $24,000, $24,000, and ($9,000) respectively. The partners share all profits and losses 16%, 48%, and 36%, respectively. Sandy has indicated that the ($9,000) deficit will be covered with a forthcoming contribution. The remaining partners have requested an immediate distribution of $20,000 in cash that is available. How should this cash be distributed?

Answer 1

Answer: Cash to be distributed to  Harding = $ 17000,  Jones = $ 3000

Explanation:

It has been indicated that the ($9,000) deficit will be covered with a forthcoming contribution

∴ The Remaining Capital Balance is = (24000 + 24000) = $48000

∵Total cash Available = $20000

Loss = 48000 - 20000 =  $ 28000

Loss will be shared between Harding & Jones in ratio = 16:48

∴  Harding Capital balance = $\frac{(24000 - 28000)\times16}{16+48}$ = $ 17000

∴ Jones Capital balance =  $\frac{(24000 - 28000)\times48}{16+48}$ = $ 3000

Cash will be Distributed in their capital balance ratio

Therefore,

Cash to be distributed to  Harding = $ 17000,  Jones = $ 3000