The partners' income and loss sharing ratio is 2:3:5 respectively. If the CHENARD JENNINGS and BLAIR Partnership is liquidated by selling the noncash assets for $375000 and creditors are paid in full what is the total amount of cash that CHENARD will receive in the distribution of cash to partners?

Question

The partners' income and loss sharing ratio is 2:3:5 respectively.  If the CHENARD JENNINGS and BLAIR Partnership is liquidated by selling the noncash assets for $375000 and creditors are paid in full what is the total amount of cash that CHENARD will receive in the distribution of cash to partners?

Quizplus · Accepted Answer

First, we need to calculate the total profit or loss of the partnership by subtracting the amount paid to creditors ($375000) from the total assets. Let's say the total assets were $500000.

Total assets = $500000
Amount paid to creditors = $375000
Total profit or loss = $500000 - $375000 = $125000

Next, we need to calculate the amount of cash each partner will receive based on their income and loss sharing ratio.

Chenard's share = 2/10 x $125000 = $25000
Jennings' share = 3/10 x $125000 = $37500
Blair's share = 5/10 x $125000 = $62500

Finally, we need to subtract the amount of capital that each partner contributed to the partnership to get the amount of cash each partner will receive.

Chenard's capital = $30000
Chenard's share of cash = $25000 - $30000 = -$5000 (Chenard will not receive any cash and will have to contribute an additional $5000 to cover his share of the loss)

Jennings' capital = $60000
Jennings' share of cash = $37500 - $60000 = -$22500 (Jennings will not receive any cash and will have to contribute an additional $22500 to cover her share of the loss)

Blair's capital = $100000
Blair's share of cash = $62500 - $100000 = -$37500 (Blair will not receive any cash and will have to contribute an additional $37500 to cover her share of the loss)

Therefore, the only partner who will receive cash is Chenard's who will receive $30000 - $5000 = $25000. Jennings and Blair will not receive any cash and will have to contribute additional funds to cover their share of the loss. The total amount of cash that Chenard will receive is $25000.

The Partners' Income and Loss Sharing Ratio Is 2:3:5 Respectively