Question

Bracken, Louden, and Menser, who share profits and losses in a ratio of 4:3:3, respectively are partners in a home decorating business that has not been able to generate the income the partners had hoped for. They have decided to liquidate the business and have sold all 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

Answer 1

The cash distribution each partner receives from liquidation depends on the profit and loss sharing ratio of 4:3:3 and the capital account balances. After paying off any liabilities with the proceeds from the sale of the remaining asset (decorating equipment), the remaining cash is distributed accordingly. The question lacks details for multiple cases, but the general approach to cash distribution remains consistent.

Step-by-step explanation:

To determine the amount of cash distribution each partner will receive from the liquidation of a home decorating business, one must first understand the profit and loss sharing ratio of the partners, which in this case is 4:3:3 for Bracken, Louden, and Menser, respectively. If the decorating equipment, the remaining asset, is sold for its book value of $40,000, the proceeds must be distributed according to this ratio after settling any liabilities and minus the partners' negative capital, if applicable (since they are personally insolvent).

Given that all liabilities have been settled and using the capital account balances provided ($25,000 for Bracken, $5,000 for Louden, and $10,000 for Menser), the distribution would be as follows: First, combine the total cash received from the sale of the decorating equipment ($40,000), then allocate it based on the given ratio. The amount that each partner would receive should reflect their respective share in the profits and losses ratio, following any required adjustments for the capital accounts.

It is necessary to note that the question as posed inquires about several independent cases which are not provided in detail. Therefore, a specific calculation cannot be given without the information on how much the decorating equipment is sold for in each case. However, the general approach would involve adjusting the proceeds from the sale of the decorating equipment for each partner's capital account balance and then applying the profit and loss ratio to distribute the remaining amount.