Partners Ron and Sandra have $3,000 capital balances and share income and losses in a 2:1 ratio for Ron and Sandra,respectively.Cash equals $1,000,noncash assets are $10,000,and liabilities are $5,000.If all the noncash assets are sold for $5,500,and each partner agrees to make up any capital deficits with personal cash contributions,Sandra eventually will receive cash of:

Question

Quizplus · Accepted Answer

First, calculate the total capital: 
Ron's capital = $3,000 x 2/3 = $2,000 
Sandra's capital = $3,000 x 1/3 = $1,000 
Total capital = $2,000 + $1,000 = $3,000

Next, calculate the total assets: 
Cash = $1,000 
Noncash assets = $10,000 
Total assets = $1,000 + $10,000 = $11,000

Liabilities are $5,000, so the total equity is: 
Total assets - liabilities = $11,000 - $5,000 = $6,000

If the noncash assets are sold for $5,500, the new total assets will be: 
Cash = $1,000 
Noncash assets = $5,500 
Total assets = $1,000 + $5,500 = $6,500

The new equity will be: 
Total assets - liabilities = $6,500 - $5,000 = $1,500

Since partners share income and losses in a 2:1 ratio for Ron and Sandra,respectively, the income or loss from the sale of assets will be allocated accordingly: 
Ron's share = $1,500 x 2/3 = $1,000 
Sandra's share = $1,500 x 1/3 = $500

Since Sandra's new capital balance will be $1,000 (her original balance) + $500 (her share of the income from the sale of assets) = $1,500, and there will be no deficits to make up, Sandra will eventually receive cash of $1,500. Therefore, the answer is C.

Partners Ron and Sandra Have $3,000 Capital Balances and Share