Alpha and beta are partners who share income in the ratio 1:2 and have capital balances of $40,000 and $70,000 at the time they decide to terminate teh partnership. after all non cash assets are sold and all liabilities are paid, there is a cash balance of $50,000. what amount of loss on realization should be allocated to alpha?

a. 60000

b. 20000

c. 30000

d. 50000

Question

Business

Daphne Curry

11 September, 03:21

Alpha and beta are partners who share income in the ratio 1:2 and have capital balances of $40,000 and $70,000 at the time they decide to terminate teh partnership. after all non cash assets are sold and all liabilities are paid, there is a cash balance of $50,000. what amount of loss on realization should be allocated to alpha?

a. 60000

b. 20000

c. 30000

d. 50000

+5

Answers (1)

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Yair Delacruz · Answer 1

The amount of loss on realization should be allocated to alpha is $30000. The right answer is C.

Explanation:

In order to calculate what amount of loss on realization should be allocated to alpha first we have to calcuate the Excess amount invested by alpha.

Excess amount invested by alpha = $40,000-$35,000 = $5,000

Then we have to calculate the Amount available for distribution after reducing amount = $50,000-$5,000

= $45,000

The Share to alpha then is $45,000*1:3 = $15,000

Therefore, Loss on realization: will be = $45,000-$15,000

= $30,000