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David Oliver and Umar Ansari, with capital balances of $61,000 and $82,000, respectively, decide to liquidate their partnership
David Oliver and Umar Ansari, with capital balances of $61,000 and $82,000, respectively, decide to liquidate their partnership. After selling the noncash assets and paying the liabilities, there is $179,000 of cash remaining. If the partners share income and losses equally, how should the cash be distributed? If an amount is zero, enter in "O". Ansari Total Oliver and Ansari Distribution of Cash Oliver Capital balances before realization Division of gain on realization Capital balances after realization Cash distributed to partners Final balances
Expert Solution
Answer
| Oliver and Ansari | |||
| Distribution of Cash | |||
| Oliver | Ansari | Total | |
| Capital Balances before realization | $ 61,000 | $ 82,000 | $ 143,000 |
| Division of gain on realization | $ 18,000 | $ 18,000 | |
| Capital Balances after realization | $ 79,000 | $ 100,000 | |
| Cash distributed to partners | $ 79,000 | $ 100,000 | |
| Final Balances | $ 0 | $ 0 |
Note
Capital Balance after Realization = Capital Balance before Realization + Division of gain on Realization.
Division of Gain on Realization
Gain on Realization = Cash of $179,000 after sale of assets - capital of $61,000 - capital of $82,000
So, Gain on Realization = $36,000
Profit Sharing Ratio = 1:1
So, Division of Gain on Realizatio is $36,000*1/2 = $18,000
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