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24 April, 03:58

Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage, $ (5,000). After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency.

What amount of cash will Gage receive upon liquidation?

a.$25,667.

b.$20,667.

c.$30,667.

d.$0.

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Answers (1)
  1. 24 April, 04:25
    0
    The correct answer is option (D).

    Explanation:

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

    Henry capital = $45,000

    Luther capital = $37,000

    Gage capital = $ (5,000)

    Cash available = $77,000

    Deficiency to be paid = 5000

    As Gage is unable to pay the deficiency, the deficiency is paid by Henry and Luther

    So, Henry capital after paying deficiency = $45,000 - $2,500 = $42,500

    and Luther capital after paying deficiency = $37,000 - $2,500 = $34,500

    Hence, cash allocation = Henry = $ 42,500

    Luther = $ 34,500

    Gage = $ 0

    Total = $ 77,000

    Therefore, Gage will receive $0 upon liquidation.
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