Nettles, King, and Tanaka are partners sharing income 3:2:1. After the firm’s loss from liquidation is distributed, the capital account balances were: Nettles, $15,000 Dr.; King, $46,000 Cr.; and Tanaka, $71,000 Cr. If Nettles is personally bankrupt and unable to pay any of the $15,000, what will be the amount of cash received by King and Tanaka upon liquidation?
Answer:
Nettles King Tanaka
Capital balances after realization……$(15,000) $ 46,000 $71,000
Distribution of partner deficiency…… 15,000 (10,000)*
Capital balances after deficiency
(5,000)**
distribution………………………………$ 0 $ 36,000 $66,000
* $15,000 × 2/3
** $15,000 × 1/3
