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 Balzac's capital balance?

Question

Quizplus · Accepted Answer

Balzac's capital balance is calculated by adding his share of the profit or loss from the sale of assets to his initial capital balance. The inventory was sold at a loss of $16,000 ($75,000 - $59,000), and the equipment was sold at a gain of $8,000 ($243,000 - $235,000). The net loss is $8,000. Balzac's share of the loss is 3/4 of $8,000, which is $6,000. Therefore, Balzac's capital balance is $260,000 - $6,000 = $254,000.

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