Question

R. Patel, D. Arno, and S. Adams have operated their partnership for several years, sharing income and loss equally. The partners decide to liquidate. Immediately prior to the final distribution of cash, the account balances are: Cash, $21,000; R. Patel, Capital, $12,000; D. Arno, Capital, $23,000; and S. Adams, Capital, $(14,000). Refer to the background information shown. Assume that Adams cannot pay any capital deficiency owed to the partnership. In the final distribution of cash, Patel and Arno will each receive_________________.

Answer 1

Patel's will receive $7,887

Arno's will receive $15,113

Step-by-step explanation:

total assets to be distributed = $23,000 (cash)

Patel's capital = $12,000

Arno's capital = $23,000

total capital = $35,000

Patel's share = $12,000 / $35,000 = 34.29% x $23,000 = $7,887

Arno's share = $23,000 / $35,000 = 65.71% x $23,000 = $15,113