Asked by Brittney Britt on Jun 11, 2024
Verified
Partners Ken and Macki each have a $40,000 capital balance and share income and losses in the ratio of 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $80,000, Macki's capital account will
A) decrease by $16,000
B) decrease by $24,000
C) increase by $24,000
D) decrease by $40,000
Capital Balance
The amount of money that stakeholders have invested in a company. This can also refer to the equity section of a company's balance sheet.
Income-Sharing Ratio
The agreed-upon distribution of income or profits among partners in a business, often expressed as a proportion or percentage.
Noncash Assets
Assets that are not in the form of cash or easily convertible into cash, such as property, plant, and equipment.
- Understand the effects of liquidation events on partner capital accounts.
Verified Answer
Learning Objectives
- Understand the effects of liquidation events on partner capital accounts.
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