Liquidating Partnerships—Deficiency Prior to liquidating their partnership, Pepper and Morrison had capital accounts of $28,000 and...

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Liquidating Partnerships—Deficiency Prior to liquidating their partnership, Pepper and Morrison had capital accounts of $28,000 and...

Liquidating Partnerships—Deficiency

Prior to liquidating their partnership, Pepper and Morrison had capital accounts of $28,000 and $100,000, respectively. The partnership assets were sold for $46,000. The partnership had no liabilities. Pepper and Morrison share income and losses equally.

Required:

a. Determine the amount of Pepper's deficiency.
$

b. Determine the amount distributed to Morrison, assuming Pepper is unable to satisfy the deficiency.
$

business accounting

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Answer 1

Answer #1

Answer:

a. $13,000

b.$46,000

Explanation:

a.

Total capital of the partnership = $28,000+ $100,000 = $128,000

Given, assets were sold for $46,000

Total deficiency = $128,000 - $46,000 = $82,000

50% of deficiency = $82,000 * 50% = $41,000 ( as this is an equal partnership)

Pepper's deficiency = $41,000 - $28,000 ( his capital) = $13,000

b.

If Pepper is not able to satisfy his deficiency, the only amount available to Morrison will be the amount acquired by selling assets if partnership.

So the amount distributed to Morrison will be $46,000

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Answer 2

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