Problem 15-14 (LO 15-3) A local dental partnership has been liquidated and the f
ID: 2411165 • Letter: P
Question
Problem 15-14 (LO 15-3) A local dental partnership has been liquidated and the final capital balances are as follows: Atkinson, capital (40% of all profits and losses) Kaporale, capital (30%) Dennsmore, capital (20%) Rasputin, capital (10%) ? 70,000 30,000 (42,000) (58,000) If Rasputin contributes additional cash of $20,000 to the partnership, what should happen to it? Determine how much of the additional cash should be distributed to each partner. (Do not round intermediate calculations.) Atkinson Kaporale DennsmoreRasputin Cash distributionExplanation / Answer
Solution:
Total cash available in partnership = $70,000 + $30,000 - $42,000 - $58,000 = $0
IF Rasputin contributes additional cash of $20,000 to the partnership then there is loss of $80,000 to Atkinson and Kaporale and this loss will be distributed in their profit sharing ratio.
Share of loss to Atkinson = $80,000*4/7 = $45,714
Share of loss to Kaporale = $80,000 * 3/7 = $34,286
Capital balances of Atkinson and Kaporale after loss distribution:
Atkinson capital = $70,000 - $45,714 = $24,286
Kaporale captial = $30,000 - $34,286 = ($4,286)
Therefore $20,000 contributed by Rasputin will be entirely distributed to Atkinson.
Cash Distribution:
Atkinson = $20,000
Kaporale = 0
Dennsmore = 0
Rasputin = 0