Question

A local partnership has assets of cash of $5,000 and a building recorded at $80,000. All liabilities have been paid. The partners capital accounts are as follows Harry $40,000, Landers $30,000 and Waters 15,000. The partners share profits and losses 3:3:4. If the building is sold for $25,000, how much cash will Harry receive in the final settlement?

Answer 1

$23,500

Step-by-step explanation:

The computation of the cash needed for reeving the final settlement is shown below:

As we can see there is a loss on sale of building because the recorded value of the building is $80,000 and the sale value is $25,000 so the loss value is $55,000

And, the profit and losses sharing ratio is 3:3:4

So the Harry loss amount is

= $55,000 × 3 ÷ 10

= $16,500

So the balance is

= Harry capital account - his share

= $40,000 - $16,500

= $23,500

Therefore, 23,500 would be received in the final settlement