Answer:
d. $20,000
Explanation:
Loss on realization is shared by the partners in their profit sharing ratio. Upon termination of a partnership, all assets are realized and liabilities are paid off. The resultant surplus/deficit on realization is to be shared by the partners in their profit sharing ratio.
In the given case, partners are to be paid the balances standing to the credit of their capital accounts i.e total payment of $ 40,000 and $70,000 which is a total of $110,000
But the available cash balance being only $80,000.
Thus, the loss of $110,000 less $80,000 i.e $30,000 would be borne by the partners in their profit sharing ratio. The journal entry would be
Ames Capital A/C Dr.10,000
Barton's Capital A/C (2/3 of 30,000) Dr.20,000
To Loss on Realization A/C 30,000
(Being loss on realization account being borne by partners in their income sharing ratio of 1:2 recorded)
