Question

Distribution of Cash Upon Liquidation Hewitt and Patel are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their capital balances are $28,000 and $18,000, respectively. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $35,000. a. What is the amount of a gain or loss on realization

Answer 1

Answer: Loss of $11,000

Step-by-step explanation:

Total Capital balance is:

= 18,000 + 28,000

= $46,000

Gain on realization = Cash balance - Capital balance

= 35,000 - 46,000

= -$11,000

This is therefore a loss because the cash available cannot cover the capital amount.