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. How much cash was paid to Balzac in the final settlement?

Question

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The total cash after liquidation is $50,000 (initial cash) + $59,000 (inventory sale) + $243,000 (equipment sale) = $352,000. The total capital balance is $100,000 (Ivey) + $260,000 (Balzac) = $360,000. The loss on inventory is $75,000 - $59,000 = $16,000. The gain on equipment is $243,000 - $235,000 = $8,000. The net loss is $16,000 - $8,000 = $8,000. Ivey's share of the loss is 1/4 of $8,000 = $2,000, and Balzac's share is 3/4 of $8,000 = $6,000. Adjusted capital balances are Ivey: $98,000 and Balzac: $254,000. Balzac receives $254,000 in the final settlement.

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