Computing Alternative Cash Distributions to Partners
Bracken, Louden, and Menser, who share profits and losses in a ratio of 4:3:3, are partners in a home decorating business that has not been able to generate the type of income hoped for by the partners. They have decided to liquidate the business and have sold all the assets except for their decorating equipment. All partnership liabilities have been settled and all the partners are personally insolvent. The decorating equipment has a book value of $40,000, and the partners have capital account balances as follows:
Bracken, capital | $25,000 |
Louden, capital | 5,000 |
Menser, capital | 10,000 |
Required
Determine the amount of cash each partner will receive as a liquidating distribution if the decorating equipment is sold for the amount stated in each of the following independent cases:
a. $30,000.
b. $21,000.
c. $7,000.
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