Problem 1514 LO 153 A local dental partnership has been liqu

Problem 15-14 (LO 15-3) A local dental partnership has been liquidated and the final capital balances are as follows: Atkinson, capital (40% of all profits and losses) Kaporale, capital (30%) Dennsmore, capital (20%) Rasputin, capital (10%) ? 70,000 30,000 (42,000) (58,000) If Rasputin contributes additional cash of $20,000 to the partnership, what should happen to it? Determine how much of the additional cash should be distributed to each partner. (Do not round intermediate calculations.) Atkinson Kaporale DennsmoreRasputin Cash distribution

Solution

Solution:

Total cash available in partnership = $70,000 + $30,000 - $42,000 - $58,000 = $0

IF Rasputin contributes additional cash of $20,000 to the partnership then there is loss of $80,000 to Atkinson and Kaporale and this loss will be distributed in their profit sharing ratio.

Share of loss to Atkinson = $80,000*4/7 = $45,714

Share of loss to Kaporale = $80,000 * 3/7 = $34,286

Capital balances of Atkinson and Kaporale after loss distribution:

Atkinson capital = $70,000 - $45,714 = $24,286

Kaporale captial = $30,000 - $34,286 = ($4,286)

Therefore $20,000 contributed by Rasputin will be entirely distributed to Atkinson.

Cash Distribution:

Atkinson = $20,000

Kaporale = 0

Dennsmore = 0

Rasputin = 0