Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000 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 $130,000. What amount of loss on realization should be allocated to Winston?

Question

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First, we need to calculate the total amount of capital available for distribution:
Soledad's Capital Balance = $100,000
Winston's Capital Balance = $140,000
Total Capital = $240,000

Since they share income in the ratio of 1:3, we can find the total income:
Total Income = 1x + 3x = $240,000
4x = $240,000
x = $60,000

Soledad's income = $60,000
Winston's income = $180,000

Now, we need to calculate the total amount of cash available for distribution:
Cash Balance = $130,000

Total Loss on Realization = Soledad's Capital Balance + Winston's Capital Balance - Total Income + Cash Balance
Total Loss on Realization = $100,000 + $140,000 - ($60,000 + $180,000) + $130,000
Total Loss on Realization = $30,000

To allocate the loss on realization, we use the income-sharing ratio:
Soledad's Loss = $30,000 x (1/4) = $7,500
Winston's Loss = $30,000 x (3/4) = $22,500

Since Winston's loss exceeds his capital balance, he has a deficit of $117,500. This means he owes the partnership this amount.

Therefore, the amount of loss on realization allocated to Winston is $82,500 (total loss - Winston's deficit).

The answer is D.

Soledad and Winston Are Partners Who Share Income in the Ratio