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 Waters receive in the final settlement?

Question

Quizplus · Accepted Answer

The total assets of the partnership are $5,000 (cash) + $80,000 (building) = $85,000.
If the building is sold for $50,000, the new value of assets would be $5,000 (cash) + $50,000 (sale price) = $55,000.
The total capital of the partnership is $40,000 + $30,000 + $15,000 = $85,000.
Since the partners share profits and losses 4:4:2, Waters would receive 2/10 of the total capital, which is $8,500.
However, since the partnership had $5,000 in cash before the sale, Waters would receive an additional $500, making the final settlement $9,000. Therefore, the best choice is B.

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