The following condensed balance sheet is presented for the partnership of D,E,and F who share profits and losses in the ratio of 5:3:2,respectively:
The partners agreed to liquidate the partnership after selling the other assets.
-Refer to the above information.If the other assets are sold for $80,000,and all partners are personally insolvent,how much should E receive upon liquidation?

Question

The following condensed balance sheet is presented for the partnership of D,E,and F who share profits and losses in the ratio of 5:3:2,respectively:
  The partners agreed to liquidate the partnership after selling the other assets.
-Refer to the above information.If the other assets are sold for $80,000,and all partners are personally insolvent,how much should E receive upon liquidation?

Quizplus · Accepted Answer

To determine the amount each partner receives upon liquidation, we first need to calculate the total assets of the partnership:

Cash + Other assets = $15,000 + $80,000 = $95,000

Next, we need to calculate the total liabilities:

Accounts payable + D's loan + E's loan + F's loan = $20,000 + $30,000 + $25,000 + $10,000 = $85,000

Finally, we can calculate the total equity, which will be distributed to the partners according to their profit-sharing ratio:

Total assets - Total liabilities = $95,000 - $85,000 = $10,000

E's share of the total equity will be:

E's profit-sharing ratio x Total equity = 3/10 x $10,000 = $3,000

However, since all partners are personally insolvent, E will not receive any payment and will instead have to use the $3,000 to pay off their personal loan. Therefore, the answer is (C) $10,000.

The Following Condensed Balance Sheet Is Presented for the Partnership