The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances: Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. What amount of cash was available for safe payments, based on the above information?

Question

The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:  Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. What amount of cash was available for safe payments, based on the above information?

Quizplus · Accepted Answer

First we need to calculate the total assets available for liquidation:

Cash: $20,000 
Accounts Receivable: $15,000 
Inventory: $30,000 
Total Assets: $65,000

Next, we need to subtract the liabilities:

Accounts Payable: $5,000

Total Assets - Total Liabilities = $60,000

Since the partnership is being liquidated, the remaining cash will be distributed based on the profit and loss sharing ratio:

Henry: 2/10 * $60,000 = $12,000 
Isaac: 4/10 * $60,000 = $24,000 
Jacobs: 4/10 * $60,000 = $24,000

Total Cash Available for Safe Payments: 
$12,000 + $24,000 + $24,000 - $5,000 (expenses) = $55,000 - $5,000 = $25,000

Therefore, the answer is C) $25,000.

The Henry, Isaac, and Jacobs Partnership Was About to Enter