Question

Adriana and Belen are partners who share income in the ratio of 3:2 and have capital balances of $50,000 and $90,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $90,000. How much cash should be distributed to Adriana

Answer 1

To find out how much cash should be distributed to Adriana, we need to calculate their share of the income and subtract their capital balance. Adriana should receive $10,000.

Step-by-step explanation:

To find out how much cash should be distributed to Adriana, we need to determine the total income and total capital of the partnership. Since the income is shared in the ratio of 3:2, we can calculate the total income as $50,000*(3+2) = $250,000. The total capital is the sum of the capital balances, which is $50,000 + $90,000 = $140,000.

Next, we need to calculate Adriana's share of the cash balance. Since the income ratio is 3:2, we can divide the total income by the ratio of 3:2 to find Adriana's share. Adriana's share is ($250,000 * 3/5) = $150,000.

Finally, we subtract the total capital from Adriana's cash share to find how much cash should be distributed to Adriana. Adriana should receive $150,000 - $140,000 = $10,000.