Distribution of Cash Upon Liquidation Bray, Lincoln, and Mapes arranged to impor
ID: 2455694 • Letter: D
Question
Distribution of Cash Upon Liquidation
Bray, Lincoln, and Mapes arranged to import and sell orchid corsages for a university dance. They agreed to share equally the net income or net loss of the venture. Bray and Lincoln advanced $225 and $300 of their own respective funds to pay for advertising and other expenses. After collecting for all sales and paying creditors, the partnership has $1,500 in cash.
Use the minus sign to indicate any deficiency for the capital accounts.
a. How should the money be distributed?
Bray
Lincoln
Mapes
Total
Capital balances and cash distribution
$
$
$
$
b. Assuming that the partnership has only $300 instead of $1,500, do any of the three partners have a capital deficiency?
Yes
If so, how much?
$
Bray
Lincoln
Mapes
Total
Capital balances
$
$
$
$
Feedback
a. Allocate equally the remaining cash adjusted for the advanced amounts as distributed net income to the partners. The original investments adjusted for the net income determines the capital for each partner.
b. When remaining cash is less than cash advanced, a loss occurs. Allocate this difference equally as the net loss to the partners. The original investments less the net loss determines the capital for each partner. Are any of these capital balances negative?
Learning Objective 4.
Bray
Lincoln
Mapes
Total
Capital balances and cash distribution
$
$
$
$
Explanation / Answer
Partners Amt paid for advertising and other exp Capital Balances and cash distribution (a) Bray 225 550 Lincoln 300 625 Mapes 325 Total 525 1500 (b) Yes Partners Amt paid for advertising and other exp Capital Balances Bray 225 150 Lincoln 300 225 Mapes -75 Total 525 300