Distribution of Cash Upon Liquidation Hewitt and Patel are partners, sharing gai
ID: 2567295 • Letter: D
Question
Distribution of Cash Upon Liquidation
Hewitt and Patel are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their capital balances are $18,000 and $12,000, respectively. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $23,000.
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?
c. How should the cash be divided between Hewitt and Patel? If an amount is zero, enter "0".
$Explanation / Answer
a Loss on realization = $7000(30000-23000) b Hewitt Loss $3500 Patel Loss $3500 c Hewitt and Patel Distribution of Cash Hewitt Patel Capital balances before realization 18000 12000 Division of gain or loss on realization -3500 -3500 Balances 14500 8500 Cash distributed to partners -14500 -8500 Final balances 0 0