The balance sheet of Ryan and Peter firm as on December 31, 2014, is given below. $$\begin{array} { | l | r | l | r | }
\hline { \text { Assets } } & &{ \text { Liabilities } } & \
\hline \text { Cash } & \$ 15,000 & \text { Accounts Payable } & \$ 15,000 \
\hline \text { Accounts Receivable } & 12,000 & \text { Other liabilities } & 25,000 \
\hline \text { Furniture } & 25,000 & \text { Partner's Equity } & \
\hline \text { Equipment } & 40,000 & \text { Ryan, Capital } & 30,000 \
\hline \text { Other assets } & \underline { 8,000 } & \text { Peter, Capital } & \underline { 30,000 } \
\hline \text { Total assets } & \$ 100,000 & \text { Total liabilities and partner's equity } & \$ 100,000 \
\hline
\end{array}$$
Ryan and Peter share profits in the ratio 3:2. They have decided to liquidate the partnership with immediate effect. The furniture and the equipment were sold at a cumulative loss of $55,000. The accounts receivable were duly received in cash and the other assets were written off as worthless. The cash balance remaining to pay the liabilities is:

Question

The balance sheet of Ryan and Peter firm as on December 31, 2014, is given below. $$\begin{array} { | l | r | l | r | } 
\hline  { \text { Assets } } & &{ \text { Liabilities } } & \
\hline \text { Cash } & \$ 15,000 & \text { Accounts Payable } & \$ 15,000 \
\hline \text { Accounts Receivable } & 12,000 & \text { Other liabilities } & 25,000 \
\hline \text { Furniture } & 25,000 & \text { Partner's Equity } & \
\hline \text { Equipment } & 40,000 & \text { Ryan, Capital } & 30,000 \
\hline \text { Other assets } & \underline { 8,000 } & \text { Peter, Capital } & \underline { 30,000 } \
\hline \text { Total assets } & \$ 100,000 & \text { Total liabilities and partner's equity } & \$ 100,000 \
\hline
\end{array}$$
 Ryan and Peter share profits in the ratio 3:2. They have decided to liquidate the partnership with immediate effect. The furniture and the equipment were sold at a cumulative loss of $55,000. The accounts receivable were duly received in cash and the other assets were written off as worthless. The cash balance remaining to pay the liabilities is:

Quizplus · Accepted Answer

The partnership will be liquidated, which means that all assets will be sold, liabilities paid off, and leftover cash will be distributed among partners according to their profit-sharing ratio.

1. The furniture and equipment are sold at a cumulative loss of $55,000. Therefore, Ryan and Peter received $40,000 (the combined salvage value) from this sale.

2. The accounts receivable were duly received in cash. Thus $12,000 is added to the already-available $15,000 cash balance.

3. The other assets were written off as worthless, which has no effect on the cash balance.

4. The total cash balance is now $27,000. Of this amount, $15,000 is needed to pay off the accounts payable.

5. The remaining cash balance is $12,000. This cash balance will be distributed among partners in the ratio 3:2 according to their profit-sharing ratio.

- Ryan's share of leftover cash = 12,000 * 3/5 = $7,200
- Peter's share of leftover cash = 12,000 * 2/5 = $4,800

6. The total cash paid to Ryan and Peter is $7,200 + $4,800 = $12,000.

7. Thus, the final cash balance is $0.

In summary, $37,000 of liabilities ($25,000 other liabilities + $15,000 accounts payable - $3,000 Ryan's share of other liabilities) paid with $27,000 of total cash ($15,000 initial cash + $12,000 received from accounts receivable) from the sale of all assets. The remaining cash of $12,000 was distributed among Ryan and Peter according to their profit-sharing ratio. Therefore the cash balance remaining to pay the liabilities is $0. So the option C) $37,000 is correct.

The Balance Sheet of Ryan and Peter Firm as on December