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2 July, 08:53

1. The DE partnership is undergoing an installment liquidation. Partners D and E share income in a 3:2 ratio and have current capital balances of $60,000 and $80,000, respectively. No loans are receivable from or payable to partners. After outside creditors are paid, if $50,000 in cash becomes available for distribution to the partners, how is it distributed? A. $50,000 to D; $0 to E B. $6,000 to D; $44,000 to E C. $30,000 to D; $20,000 to E D. $12,000 to D; $38,000 to E

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  1. 2 July, 10:00
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    The correct answer is option (C):

    $30,000 to D; $20,000 to E

    Explanation:

    The key to solving this problem is to take not of the ratio at which income are shared which is 3:2 for partners D and E respectively. This means that out of every 5 parts (3 + 2), partner D gets 3 parts and the remaining 2 parts is for partner E.

    Amount available to be shared = $50,000

    Therefore amounts each partner gets is calculated thus:

    Partner D:

    3/5 of 50,000

    = 3/5 * 50,000 = 0.6 * 50,000 = $30,000

    Partner E:

    2/5 of 50,000 = 0.4 * 50,000 = $20,000

    hence partner D gets $30,000 while partner E gets $20,000
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