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8 December, 21:19

Liquidating Partnerships:

Prior to liquidating their partnership, Todd and Gentry had capital accounts of $25,000 and $49,000, respectively. Prior to liquidation, the partnership had no cash assets other than what was realized from the sale of assets. These partnership assets were sold for $71,000. The partnership had $3,000 of liabilities. Todd and Gentry share income and losses equally.

Determine the amount received by Parker as a final distribution from liquidation of the partnership in $.

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  1. 8 December, 21:43
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    The correct answer is $22,000.

    Explanation:

    According to the scenario, the computation of the given data are as follows:

    First we calculate the Non cash Assets prior to liquidation,

    So, Non cash Assets = Capital account of Todd + Capital account of Gentry + Liabilities

    = $25,000 + $49,000 + $3,000 = $77,000

    Assets sold = $71,000

    So, Gain or Loss on Liquidation = Assets sold - Non cash Assets

    = $71,000 - $77,000 = - $6,000

    So, Loss on liquidation = $6,000

    As both partners share income and losses equally, then

    Todd share in loss = $6,000 * 50% = $3,000

    So, Todd cash balance = Capital account of Todd - Todd share in loss

    By putting the value, we get

    Todd cash balance = $25,000 - $3,000 = $22,000

    (Note. = As there is no partner with name of Parker, Hence we calculate Todd cash balance.)
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