Partners Robert and Sally have $3,600 capital balances and share income and losses in a 2:1 ratio for Robert and Sally, respectively. Cash equals $1,200, noncash assets are $12,000, and liabilities are $5,500. If all the noncash assets are sold for $5,700, and each partner agrees to make up any capital deficits with personal cash contributions, Sally eventually will receive cash of:

Question

Quizplus · Accepted Answer

First, calculate the total cash after selling noncash assets: $1,200 (initial cash) + $5,700 (from sale) = $6,900. Subtract liabilities: $6,900 - $5,500 = $1,400 (total cash available for partners).The total capital before adjustments is $3,600 (Robert) + $3,600 (Sally) = $7,200. The loss from selling the noncash assets is $12,000 (value) - $5,700 (sale) = $6,300. This loss is shared in a 2:1 ratio: Robert absorbs 2/3, and Sally absorbs 1/3.Robert's share of the loss: $6,300 * 2/3 = $4,200.Sally's share of the loss: $6,300 * 1/3 = $2,100.Adjusting their capital balances for the loss:- Robert: $3,600 - $4,200 = -$600 (deficit).- Sally: $3,600 - $2,100 = $1,500.Since Robert has a deficit, he must contribute $600 to cover it, leaving $1,400 - $600 = $800 in the partnership for distribution. However, since Sally's adjusted capital is $1,500, and there's only $800 left, she needs to contribute $700 more to cover her share of the capital, resulting in her receiving $1,500 after her additional contribution.

Partners Robert and Sally Have $3,600 Capital Balances and Share