Question

Liquidating Partnerships:

Answer 1

Answer:

The correct answer is $22,000.

Explanation:

According to the scenario, the computation of the given data are as follows:

First we calculate the Non cash Assets prior to liquidation,

So, Non cash Assets = Capital account of Todd + Capital account of Gentry + Liabilities

= $25,000 + $49,000 + $3,000 = $77,000

Assets sold= $71,000

So, Gain or Loss on Liquidation = Assets sold - Non cash Assets

= $71,000 - $77,000 = -$6,000

So, Loss on liquidation = $6,000

As both partners share income and losses equally, then

Todd share in loss = $6,000 × 50% = $3,000

So, Todd cash balance = Capital account of Todd - Todd share in loss

By putting the value, we get

Todd cash balance = $25,000 - $3,000 = $22,000

(Note.= As there is no partner with name of Parker, Hence we calculate Todd cash balance.)