Antonio and Barbara are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000 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 $80,000. What amount of loss on realization should be allocated to Barbara?

Question

Quizplus · Accepted Answer

To find out the amount of loss on realization that should be allocated to Barbara, we need to first calculate the total capital of the partnership, which is the sum of the capital balances of Antonio and Barbara:
Total capital = $40,000 + $70,000 = $110,000

Next, we need to calculate the total amount of cash that will be distributed to the partners:
Antonio's share of cash = $80,000 × 1/3 (1/1+2) = $26,667
Barbara's share of cash = $80,000 × 2/3 (2/1+2) = $53,333

Since the total cash received is $80,000, we can verify that the sum of the individual shares equals the total cash:
$26,667 + $53,333 = $80,000

Now, we can calculate the amount of loss on realization:
Total capital - Total cash = Loss on realization
$110,000 - $80,000 = $30,000

Finally, we can allocate the loss to Barbara's capital based on the profit and loss sharing ratio:
Barbara's share of loss = $30,000 × 2/3 (2/1+2) = $20,000

Therefore, the answer is choice C, $20,000, as this is the amount of loss on realization that should be allocated to Barbara.

Antonio and Barbara Are Partners Who Share Income in the Ratio