Ask Question
10 June, 00:36

Assume that a partnership had assets with a book value of $240,000 and a market value of $195,000, outside liabilities of $70,000, loans payable to partner Able of $20,000, and capital balances for partners Able, Baker, and Chapman of $70,000, $30,000, and $50,000. How much would Able receive upon liquidation of the partnership assuming profits and losses are allocated equally?

A. $70,000

B. $90,000

C. $75,000

D. $55,000

+4
Answers (1)
  1. 10 June, 03:27
    0
    Correct answer is D $55,000

    Explanation:

    During the liquidation process of the partnership, the asset will be sold, pay all liabilities and distribute the remaining funds to partners. Hence, the value of asset that we are going to use is the market value. First preference on distribution is the outside creditors, followed by the partner creditors and then divide the remaining amount to the partners based on the agreed allocation.

    1. $195,000 - $70,000 (outside creditor) = $125,000

    2. $125,000 - $20,000 (Able) = $105,000

    3. $105,000 / 3 (equally) = $35,000

    Therefore, the total amount that Able received upon liquidation is, $20,000 (receivable from partnership) + $35,000 (share on remaining funds) = $55,000
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Assume that a partnership had assets with a book value of $240,000 and a market value of $195,000, outside liabilities of $70,000, loans ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers