A local partnership has assets of cash of $5,000 and a building recorded at $80,000. All liabilities have been paid. The partners capital accounts are as follows Harry $40,000, Landers $30,000 and Waters 15,000. The partners share profits and losses 4:4:2.
-If the building is sold for $50,000, how much cash will Harry receive in the final settlement?

Question

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The building is sold for $50,000, resulting in a loss of $30,000 ($80,000 - $50,000). This loss is shared by the partners in their profit and loss ratio of 4:4:2. Harry's share of the loss is 4/10 * $30,000 = $12,000. His capital account is reduced to $40,000 - $12,000 = $28,000. After paying off all liabilities, the remaining assets are $5,000 cash and $28,000 in Harry's capital account, totaling $33,000. Harry's share of this is 4/10 * $33,000 = $13,200. However, he has already received $12,000 in the distribution of the building sale proceeds, so his final cash settlement is $13,200 - $12,000 = $1,200.

A Local Partnership Has Assets of Cash of $5,000 and a Building