Distribution of Cash Upon Liquidation Hewitt and Patel are partners, sharing gai

Question

Distribution of Cash Upon Liquidation Hewitt and Patel are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realzation, their capital balances are $30,000 and $20,000, respectively. After all noncash assets are sold and all liabilitles are paid, there is a cash balance of $38,000. a. What is the amount of a gain or loss on realization? b. How should the gain or loss be divided between Hewitt and Patel? Hewitt Patel c. How should the cash be divided between Hewitt and Patel? If an amount is zero, enter"0". Hewitt and Patel Distribution of Cash Hewitt Patel Capital balances before realization Division of gain or loss on realization Balances Cash distributed to partners Final balances

Explanation / Answer

a)

The amount of a gain or loss on realization

= $ 12000 Loss

[ 38000 - (30000 + 20000) ]

b)

The gain or loss be divided between Hewitt and Patel

Hewitt = $ 6000

Patel = $ 6000

c)

Hewitt and Patel Distribution of Cash Hewitt Patel Capital balances before realization 30000 20000 Division of gain or loss on realization 6000 6000 Balances 24000 14000 Cash distributed to partners 24000 14000 Final balance 0 0

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