Module 9 Multiple Choice Practice Question 2 Help Please

[liliana.cavalheiro]

• Hi Everyone,
• I feel really dumb right now, but i just don't understand how they reached the correct answer. Can anyone explain it to me?

   

• Module 9 Multiple Choice Practice Question 2

  	Aaron, Babs, and Cory were equal partners in a delivery business. When Aaron gave notice of dissolution of the partnership, Aaron had $30,000 in his capital account, Babs had $50,000, and Cory had $20,000. The partnership assets were $130,000 and the liabilities were $39,000. How much money will be distributed to Aaron, Babs, and Cory, respectively? Module 9, June03L Answer
  	Selected Answer: $30,000; $50,000; $20,000 Correct Answer: $27,000; $47,000; $17,000 Answer Feedback: Sorry. The total of these numbers is not $91,000, which is the amount available for distribution.   Thank you, Lily

[Derek Jones]

Hey Liliana

I got this quesiton correct when I did the practice, and here's my understanding...

The partnership has total assets of $130,000, $100,000 of which we know was cash in the individual partner's capital accounts and $30,000 of which we can assume are the business's other assets. Upon dissolution the liabilities were $39,000 of which $30,000 can be covered by the assets of the business, leaving $9,000 outstanding. Since it is a partnership we know that the partners are individually liable for the outstanding debts, and since there is no information in the question to the contrary, we can assume that they are equally liable. So each individual partner is liable for $3,000 of the outstanding $9,000 debt, which would be taken from their capital account before the remainder was distributed to the partner. That would leave each partner with $27,000 $47,000 and $17,000 respectively after they settled all of their obligations.

Hope this is clear and helps!

D