Liquidating PartnershipsDeficiency Prior to liquidating thei

Liquidating Partnerships—Deficiency

Prior to liquidating their partnership, Short and Bain had capital accounts of $10,000 and $37,000, respectively. The partnership assets were sold for $17,000. The partnership had no liabilities. Short and Bain share income and losses equally.

Required:

a. Determine the amount of Short\'s deficiency.
$

b. Determine the amount distributed to Bain, assuming Short is unable to satisfy the deficiency.

Solution

a Sale of assets 17000 Carrying value of assets 47000 =10000+37000 Loss on liquidation -30000 Amount of Short\'s deficiency= (30000*50%)-10000 = $5000 b Amount distributed to Bain = Amount realized from asset sales = $17000