Alpha and Beta are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000, respectively, at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $50,000. What amount of loss on realization should be allocated to Alpha?

Question

Quizplus · Accepted Answer

The total capital before liquidation is $40,000 (Alpha) + $70,000 (Beta) = $110,000. After liquidation, there's $50,000 left, indicating a loss of $60,000 ($110,000 - $50,000). This loss is shared in the income ratio of 1:2. Alpha's share of the loss is 1/3 of $60,000, which is $20,000.

Alpha and Beta Are Partners Who Share Income in the Ratio