Assume a partnership has assets with a book value of $500,000 and a market value of $450,000.Outside liabilities of $100,000, loans payable to Partner A of $30,000 and capital balances of A $200,000, B $180,000 and C $150,000.How much would Partner A receive on liquidation of the partnership assuming partnership profit and loss is allocated equally
$$\begin{array} { | l | l | l | l | l | }
\hline & \text { A Loan } & \text { A } & \text { B } & \text { C } \
\hline & \$ 30,000 & \$ 200,000 & \$ 180,000 & \$ 150,000 \
\hline \text { Loss on sale } & & ( \$ 16,666 ) & ( \$ 16,666 ) & ( \$ 16,666 ) \
\hline & & \$ 183,334 & & \
\hline
\end{array}$$

Question

Assume a partnership has assets with a book value of $500,000 and a market value of $450,000.Outside liabilities of $100,000, loans payable to Partner A of $30,000 and capital balances of A $200,000, B $180,000 and C $150,000.How much would Partner A receive on liquidation of the partnership assuming partnership profit and loss is allocated equally
$$\begin{array} { | l | l | l | l | l | } 
\hline & \text { A Loan } & \text { A } & \text { B } & \text { C } \
\hline & \$ 30,000 & \$ 200,000 & \$ 180,000 & \$ 150,000 \
\hline \text { Loss on sale } & & ( \$ 16,666 ) & ( \$ 16,666 ) & ( \$ 16,666 ) \
\hline & & \$ 183,334 & & \
\hline
\end{array}$$

Quizplus · Accepted Answer

The total market value of the assets is $450,000. After paying off the outside liabilities of $100,000, the remaining amount is $350,000. The loans payable to Partner A ($30,000) are paid off next, leaving $320,000 to be distributed among the partners according to their capital balances and the loss on sale of assets. The loss on sale ($50,000, which is the difference between the book value of $500,000 and the market value of $450,000) is allocated equally among the partners, resulting in a loss of $16,666 for each. After adjusting Partner A's capital account for the loss, Partner A's adjusted capital is $183,334. Therefore, Partner A would receive their loan of $30,000 plus their adjusted capital of $183,334, totaling $213,334. However, the question specifically asks how much Partner A would receive, not including the repayment of the loan to Partner A, which makes the correct answer $183,334.

Assume a Partnership Has Assets with a Book Value of $500,000