Question

Bill, Page, Larry, and Scott have decided to terminate their partnership. The partnership's balance sheet at the time they decide to wind up is as follows: Cash $ 100,000 Accounts payable $ 100,000 Noncash Assets 300,000 Bill, Capital 25,000 Page, Capital 110,000 Larry, Capital 100,000 Scott, Capital 65,000 $ 400,000 Total $ 400,000 During the winding up of the partnership, the other assets are sold for $150,000 and the accounts payable are paid. Page and Larry are personally solvent, but Bill and Scott are personally insolvent. The partners share profits and losses in the ratio of 3:2:1:4. Based on the preceding information, what amounts will be distributed to Page and Larry upon liquidation of the partnership? Page Larry

A) $ 0 $ 0
B) $ 80,000 $ 85,000
C) $ 74,286 $ 82,143
D) $ 70,000 $ 80,000

Answer 1

Answer:The answer is $0 $0

Step-by-step explanation:

The entry in the Balance sheet

Dr : capital Bill $25,000, page $110,000,Larry $100,000, Scot $65,000, Account payable $100,000 , Total Dr $400,000 Cr : Non cash asset $300,000, cash $ 100,000, Total Cr $400,000

The entry in the Realisation Account will be

Dr: sundry Asset $400,000, Cr : proceed from sale of asset $150,000, Balance c/d $250,000 , Share of the loss Bill 3/10 × 250,000 = $75,000, Page 2/10 × 250,000 = $50,000, Larry 1/10 × 250,000 = $25,000, Scot 4/10 × 250,000 = $100,000Total Dr : $400,000, Total Cr :$400,000

The entry in the capital Account of the partners will be

Bill Dr: share of loss $75,000, Total Dr:$75,000 Cr : Balance b/d $25,000,Balance c/d $50,000, Total Cr: $75,000

Page Dr: share of loss $50,000, Balance c/d $60,000, Total Dr:$110,000Cr: Balance b/d $110,000, Total Cr : $110,000

Larry Dr : share of loss $25,000, Balance c /d $75,000, Total Dr:$100,000, Cr : Balance b /d $100,000 Total Cr $100,000

Scot Dr: share of loss $100,000, Total Dr : $100,000Cr: Balance b /d $65,000, Balance c /d $35,000, Total Cr :$100,000

Note : if realisation of the asset result in a loss and a partners capital account is already or is thereby placed in debt, the partner must pay in enough cash to clear the balance. Otherwise, the remaining partners cannot be paid the sums shown to their credit. Since Page and Larry capital account both showed a debit balance, The amount to be distributed to page and Larry upon liquidation of the partnership is $0 $0