Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start of the process, capital balances were as follows:

Which one of the following statements is true for a predistribution plan?

Question

Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start of the process, capital balances were as follows:

Which one of the following statements is true for a predistribution plan?

Quizplus · Accepted Answer

According to the predistribution plan, the first available cash of $16,000 would go to Newman. Next $12,000 would be distributed with $8,000 to Dancey and $4,000 to Newman. The remaining $32,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $60,000 before all four partners share any further payments in their profit and loss sharing ratios, as their partnership agreement specifies the sharing of profits and losses on a 4:2:2:2 basis, respectively. Therefore, option B is the correct choice.

Dancey, Reese, Newman, and Jahn Were Partners Who Shared Profits