I need help with this problem.
Partners Eric & Jeremy each have $3,000 capital balances and share income & losses in a 2:1 ratio, respectively. Cash equals $1,000, non cash assets are $10,000 and liabilities are $5,000. If all the non-cash assets are sold for $4,000, and each partner is personally insolvent, Jeremy eventually will receive cash of.......?
a - $0
b - $1,000
c - $1,500
d - $2,000
Please help!!
2007-06-25 04:46:38 · 3 answers · asked by curlyzack 1 in Business & Finance ➔ Other - Business & Finance
For this question, concentrate on the realizable value of the non-cash assets, ignore the book value of $10k. So you sell the non-cash assets and you have $4k as the proceeds. Add that to the $1k cash you originally had and you have a total cash amt of $5k - only just enough to settle your liabilities of $5k. That leaves nothing to return to the partners. Their profit-sharing ratio is irrelevant, cos any percentage of 0 will give you 0. So the answer is (a) - $0.
2007-06-25 15:48:56 · answer #1 · answered by Sandy 7 · 0⤊ 0⤋
I would say a. They have $1000 + 4000 from assets sold. Then they have to pay off the liabilities of 5000. So, $0.
2007-06-25 04:52:00 · answer #2 · answered by Rachel 6 · 0⤊ 0⤋
I agree the answer will be zero as there is no cash available after all liabilities are paid.
2007-06-25 09:16:49 · answer #3 · answered by Highlandbound 6 · 0⤊ 0⤋