Question

Exercise 16-5

Following is the balance sheet of the BDO Partnership:

Cash		$12,000		Liabilities		$12,000
Accounts Receivable		41,000		Brink, Capital		47,000
Inventory		28,000		Davis, Capital		25,000
Equipment		58,000		Olsen, Capital		55,000
		$139,000				$139,000

The partners share income 40:40:20, respectively. Assume that 70% of the receivables are collected and that inventory with a book value of $14,000 is sold for $10,000. All cash available at this time is to be distributed.

Determine the proper distribution of cash, using the safe payment approach. (Round answers to 0 decimal places, e.g. 5,125. Enter credit balance of an account and credit posting to an account with negative sign preceding the number, e.g. -45 or parentheses, e.g. (45).)

Capital Balances

Cash

Noncash Assets

Liabilities

Brink 40%

Davis 40%

Olsen 20%

Account BalancesPayment to CreditorsPayment to PartnersSale of Inventory, Collect Accounts Receivable

$

$

$

$

$

$

Account BalancesPayment to CreditorsPayment to PartnersSale of Inventory, Collect Accounts Receivable

Account BalancesPayment to CreditorsPayment to PartnersSale of Inventory, Collect Accounts Receivable

Account BalancesPayment to CreditorsPayment to PartnersSale of Inventory, Collect Accounts Receivable

$

$

$

$

$

$

Answer 1

Given ,

The profit sharing ratio of partners is 40:40:20.

Cash balance after adjustments:

Opening balance = 12,000

Cash received from sale of inventory = 10,000

Cash collected from accounts receivables = 41,000*70% = 28,700

Cash balance after above adjustments = 50,700

Non cash assets:

Balance of account receivable = 41,000*30% = 12,300

Balance of inventory = 28,000-14000 = 14000

Equipment = 58,000

Total non cash assets = 84,300

Liabilities: = 12,000

Capital Balances :

	Brink	Davis	Olsen
Opening balance	47000	25000	55000
Cash distributed	20280	20280	10140
Closing balance	67280	45280	65140