Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $130,000. What amount of loss on realization should be allocated to Soledad?

Question

Quizplus · Accepted Answer

First, we need to find the total capital of the partnership, which is $100,000 + $140,000 = $240,000.
Next, we need to find the total profit or loss of the partnership, which is:
Cash balance - Total capital = $130,000 - $240,000 = -$110,000 (negative indicates a loss)
Since the partners share income in the ratio of 1:3, Soledad's share is 1/4 and Winston's share is 3/4.
Soledad's share of the loss would be:
1/4 x (-$110,000) = -$27,500
Therefore, the answer is B, $27,500.

Soledad and Winston Are Partners Who Share Income in the Ratio