The partnership of Homer,Marge,and Bart share profits and losses in the ratio of 4:4:2,respectively.The partners voted to dissolve the partnership when its assets,liabilities,and capital were as follows: The partnership will be liquidated over a prolonged period of time.As cash is available,it will be distributed to the partners.The first sale of noncash assets having a book value of $360,000 realized $285,000.How much cash should be distributed to each partner after this sale?

Question

The partnership of Homer,Marge,and Bart share profits and losses in the ratio of 4:4:2,respectively.The partners voted to dissolve the partnership when its assets,liabilities,and capital were as follows:  The partnership will be liquidated over a prolonged period of time.As cash is available,it will be distributed to the partners.The first sale of noncash assets having a book value of $360,000 realized $285,000.How much cash should be distributed to each partner after this sale?

Quizplus · Accepted Answer

First, we need to determine the total book value of the assets before the sale:
Total Book Value = $1,980,000 + $540,000 + $90,000 = $2,610,000

The sale of noncash assets realized $285,000, which is $75,000 less than the book value:
$360,000 - $285,000 = $75,000

This $75,000 loss should be allocated among the partners based on their profit and loss sharing ratio:
Homer and Marge: 4/10 x $75,000 = $30,000 loss each
Bart: 2/10 x $75,000 = $15,000 loss

Next, we need to adjust the partners' capital accounts by deducting the losses and reducing the book value of the noncash assets:
Homer: $1,584,000 - $30,000 - $360,000 = $1,194,000
Marge: $1,584,000 - $30,000 - $360,000 = $1,194,000
Bart: $792,000 - $15,000 - $270,000 = $507,000

The total cash available for distribution is the sale proceeds minus the decrease in book value:
$285,000 - $75,000 = $210,000

The cash distribution to each partner is based on their adjusted capital account balance:
Homer: 4/10 x $1,194,000 + $54,000 = $543,600
Marge: 4/10 x $1,194,000 + $84,000 = $583,600
Bart: 2/10 x $507,000 + $177,000 = $282,600

Therefore, the answer is A) Homer, $54,000; Marge, $84,000; Bart, $177,000.

The Partnership of Homer,Marge,and Bart Share Profits and Losses in the Ratio