Question

A, B, and C have capital balances of $80,000, $80,000, and $40,000, respectively. Profits are allocated 40% to A, 40% to B and 20% to C. The partners have decided to dissolve and liquidate the partnership. After paying all creditors the amount available for distribution is $20,000. A, and B are personally solvent. C is personally insolvent. Under the circumstances, A and B will each:

Answer 1

receive $8,000 each

Step-by-step explanation:

In the question, A and B are solvent partners whereas C is an insolvent partner but the amount would be distributed to all partners in their profit-loss sharing ratio i.e 4:4:2 as C is not in the condition to contribute the amount but has the right to take his profit

So, A and B would be received

= $20,000 × 4 ÷ 10

= $8,000 each

And, the remaining amount would be given to C partner i.e

= $20,000 - $8,000 - $8,000

= $4,000