Carl, Brian, and Ann share profits and losses in a 2:1:1 ratio, respectively, in their partnership. The assets are to be reduced $12,000 in value when Brian wishes to leave the partnership. If each partner had a capital balance of $36,000 before Brian's notification of withdrawal, what amount should Brian be allowed to withdraw from the partnership?

Question

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Before the reduction, the total capital is $36,000 * 3 = $108,000. After a $12,000 reduction, the total capital is $96,000. Brian's share before leaving is 1/4 of $96,000 = $24,000. However, since his original capital was $36,000, he should be allowed to withdraw $36,000 - $24,000 = $12,000. Given the profit and loss sharing ratio, the $12,000 loss is absorbed as follows: Carl absorbs $6,000 (1/2 of $12,000 due to the 2:1:1 ratio), and Brian and Ann each absorb $3,000. Therefore, Brian's withdrawal amount is his original capital minus his share of the loss: $36,000 - $3,000 = $33,000.

Carl, Brian, and Ann Share Profits and Losses in a 2:1:1