Question

Prior to liquidating their partnership, Pepper and Russo had capital accounts of $30,000 and $119,000, respectively. The partnership assets were sold for $55,000. The partnership had no liabilities. Pepper and Russo share income and losses equally.

a. Determine the amount of Pepper's deficiency. $ 50,000
b. Determine the amount distributed to Russo, assuming Pepper is unable to satisfy the deficiency.

Answer 1

A. - $17,000

B. $55,000

Step-by-step explanation:

value of assets on liquidation= $30,000 + $119,000

=$149,000

Less : sale value of assets = $55,000

Loss on liquidation =$94,000

• Pepper's liability in loss = $94,000* 1/2 = $47,000
• Pepper's deficiency = $47,000 - $30,000 = $17,000

Amount distributed to Russo = $119,000 - Share in loss

= $119,000 - ($94,000*1/2)

= $119,000 - $47,000

= $55,000