Ivey and Balzac had a partnership that distributed profits in a ratio of 1:3 respectively. At the end of 2013, they agreed to liquidate the partnership. Prior to liquidation, the partnership had Cash of $50 000, Inventory of $75 000, Equipment (net)of $235 000, and no payables. Partner capital balances were: Ivey: $100 000 Balzac: $260 000
The inventory was sold for $59 000 and the equipment was sold for $243 000. After the assets were sold, what was Ivey's capital balance?

Question

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Ivey's capital balance after the assets were sold is $98,000. This is calculated as follows:Ivey's share of profits = 1/4Ivey's share of losses = 1/4Ivey's share of assets = 1/4Ivey's share of cash = $50,000 x 1/4 = $12,500Ivey's share of inventory = $59,000 x 1/4 = $14,750Ivey's share of equipment = $243,000 x 1/4 = $60,750Ivey's total share of assets = $12,500 + $14,750 + $60,750 = $88,000Ivey's capital balance after the assets were sold = $88,000 + $100,000 = $98,000

Ivey and Balzac Had a Partnership That Distributed Profits in a Ratio