Homework SoursePartner D has a deficit balance of 45000 after the sale of p
Partner D has a deficit balance of $45,000 after the sale of partnership assets, the other two partners, M and S, have credit balances of $110,000 and $90,000 each. The profit and loss ratios for the partners are D, 20%, M, 50%, and S, 30%. Partner D does not have the ability to contribute assets to cover the deficit. Answer the following, and explain your answers: (1) how much cash is available to the partners? and (2) how much will each partner receive?
Solution
1)Total cash availability= 45000+110000+90000 =$245000. This is the total cash available to partners as legally D has to bring $ 45000 and this is to be shared by M&S Partners.
2) Each partner receive on the partners sharing ratio of D,20%, M, 50%, S,30%.
Distributing the above in their ratio is
| As D cannot contibute his loss of $45000 is shared by M & S in their profit sharing ratio | ||||||
| Therefore M Contribution is $45000*50/80 | 28125 | |||||
| and S Contribution is $45000*30/80 | 16875 | |||||
| Partner | D | M | S | |||
| Present balance | $(45000) | $110000 | $90000 | |||
| Loss of D shared by M&S | $45000 | $(28125) | $(16875) | |||
| Net Receivable | 0 | $81875 | $73125 |
