Question

Distribution of Cash Upon Liquidation

Hewitt and Patel are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their capital balances are $42,000 and $28,000, respectively. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $53,000.

a. What is the amount of a gain or loss on realization?

$

b. How should the gain or loss be divided between Hewitt and Patel?

Hewitt
Patel

c. How should the cash be divided between Hewitt and Patel? If an amount is zero, enter "0".

Hewitt and Patel
Distribution of Cash
	Hewitt	Patel
Capital balances before realization	$	$
Division of gain or loss on realization
Balances	$	$
Cash distributed to partners
Final balances	$	$

Liquidating Partnerships—Capital Deficiency

Nettles, King, and Tanaka are partners sharing income 3:2:1. After the firm's loss from liquidation is distributed, the capital account balances were: Nettles, $24,000 Dr.; King, $88,000 Cr.; and Tanaka, $64,000 Cr.

If Nettles is personally bankrupt and unable to pay any of the $24,000, what will be the amount of cash received by King and Tanaka upon liquidation? If an amount is zero, enter in 0. Use the minus sign to indicate any deficiencies.

Amount of Cash Received
	Nettles	King	Tanaka
Capital balances after realization	$	$	$
Distribution of partner deficiency
Capital balances after deficiency distribution	$	$	$

Answer 1

Solution:

A. Amount loss on realization = ($42,000+$28,000) - $53,000 = $17,000.

B. According to the question and Patel are partners, sharing gains and losses are equally. So they loss be divided between both equally.

C. Cash can be divided between Hewitt and Patel as per their capital ratio that is as follows:

Hewitt = ($53,000/$68,000)* $42,000 = $32,735.29.

Patel = ($53,000/$68,000)* $28,000 = $21,823.53.