Question

Prior to liquidating their partnership, Perkins and Brooks had capital accounts of $17,000 and $26,000, respectively. Prior to liquidation, the partnership had no cash assets other than what was realized from the sale of assets. These partnership assets were sold for $52,000. The partnership had $2,000 of liabilities. Perkins and Brooks share income and losses equally. Determine the amount received by Perkins as a final distribution from liquidation of the partnership.

Answer 1

Answer:

The amount received by Perkins as a final distribution from liquidation of the partnership is $65,500

Explanation:

In order to calculate the amount received by Perkins as a final distribution from liquidation of the partnership we would have to make the following calculation:

amount received by Perkins as a final distribution from liquidation of the partnership=Perkins share of profit+Perkins capital account balance

Perkins capital account balance=$17,000

To calculate Perkins share of profit we would have to calculate the profit on liquidation as follows:

profit on liquidation=carrying value of non-cash asset prior to liquidation+sale of asset

carrying value of non-cash asset prior to liquidation=Perkins and Brooks capital accounts+partnership labilities

carrying value of non-cash asset prior to liquidation=$17,000 + $26,000 +$2,000=$45,000

Hence, profit on liquidation=$45,000+$52,000

profit on liquidation=$97,000

As Perkins and Brooks share income and losses equally, Perkins share of profit=$97,000*50%

Perkins share of profit=$48,500

Therefore, amount received by Perkins as a final distribution from liquidation of the partnership=$48,500+$17,000

amount received by Perkins as a final distribution from liquidation of the partnership=$65,500

The amount received by Perkins as a final distribution from liquidation of the partnership is $65,500