Question

A local dental partnership has been liquidated and the final capital balances are: Atkinson, capital (40% of all profits and losses) . . . . . . . . $ 70,000 Kaporale, capital (30%) . . . . . 30,000 Dennsmore, capital (20%) . . . (42,000) Rasputin, capital (10%) . . . . . (58,000) If Rasputin contributes additional cash of $20,000 to the partnership, what should happen to it?

Answer 1

Answer:

Cash distribution

Atkinson $20,000

Kaporale $0

Dennsmore $0

Rasputin $0

Explanation:

Computation of what should happen if Rasputin contributes additional cash of $20,000 to the partnership

Atkinson Kaporale Dennsmore Rasputin

Reported balances

$70,000 $30,000 $(42,000) $(58,000)

Capital contribution$0 $0 $0 $20,000

Adjusted balances

$70,000 $30,000 $(42,000) $(38,000)

Potential loss from Dennsmore and Rasputin(42,000+38,000=80,000) split on a 4:3 basis

(45,714) (34,285) 42,000 38,000

Adjusted balances

$24,286 $(4,285) $0 $0

Potential lossfrom Kaporale ($4,285)

(4,285) 4,285 $0 $0

Cash distribution $20,000 $0 $0 $0

Calculation for the potential loss

Potential loss from Dennsmore and Rasputin(42,000+38,000=80,000) split on a 4:3 basis

Dennsmore(4/7×80,000)= 45,714

Rasputin (3/7×80,000)=34,285

Therefore what should happen if Rasputin contributes additional cash of $20,000 to the partnership is that Atkinson will have cash of $20,000, Kaporale $0 , Dennsmore $0 and Rasputin will have cash of $0