EX 12-20 Distribution of cash upon liquidation

David Oliver and Umar Ansari, with capital balances of $28,000 and $35,000, respectively, decide to liquidate their partnership. After selling the noncash assets and paying the liabilities, there is $67,000 of cash remaining. If the partners share income and losses equally, how should the cash be distributed?


Answer:

Oliver Ansari Total
Capital balances before realization………… $28,000 $35,000 $63,000
Division of gain on realization
[($67,000 – $63,000) ÷ 2]……………………… 2,000 2,000
Capital balances after realization………… $30,000 $37,000
Cash distributed to partners………………… 30,000 37,000
Final balances………………………………… $ 0 $ 0