Question

Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for $180,000. Liquidation expenses were $12,000. Assume that Lewis was personally insolvent and could not contribute any assets to the partnership, while Keaton and Meador were both solvent. What amount of cash would Keaton have received from the distribution of partnership assets?

Answer 1

Answer:

$29,334

Explanation:

Loss on sale=Book value - Selling price ($300,000- $180,000) =$120,000

Allocation of loss :

Keaton $120,000×20%=$24,000

Lewis $120,000× 40%= 48,000

Meador $120,000×40% = $48,000

Each partner allocation of liquidation expenses:

Keaton $12,000×20%=$2,400

Lewis $12,000× 40%= $4,800

Meador $12,000×40%=$4,800

Capital accout balance after the allocation of the loss:

Keaton( $60,000-$24,000-$2,400)

=$33,600

Lewis ($40,000-$48,000-$4,800)= ($12,800) Deficit

Meador ($80,000-$48,000-$4,800)= $27,200

Allocation of Lewis $ deficit to Keaton and Meador

$12,800×1/3=$4,266

$4,266 to Keaton and $8,534 to Meador

($12,800×2/3) $8,533

Keaton Ending capital account balance $33,600-$4,266 =$29,334