Minden, Mel, and Montana decide to liquidate their partnership. All assets are sold, and the liabilities are paid. Following these transactions, the capital balances are as follows: Minden, $27,400; Mel, $(12,600); Montana, $43,500. The income-sharing ratio for Minden, Mel, and Montana is 3:4:3. Mel is unable to contribute any assets to reduce the deficiency. How much cash will Montana receive as a result of the partnership liquidation

Minden, Mel, and Montana

Montana will receive $37,200 following the partnership liquidation.

Explanation:

Capital balances    Income-sharing ratios  New sharing ratios

Minden, $27,400;       3/10                              1/2

Mel, $(12,600);            4/10                              0

Montana, $43,500     3/10                              1/2

The negative balance of Mel's capital will be shared equally between Minden and Montana, thus:

Minden = $12,600/2 = $6,300

Montana = $12,600/2 = $6,300

Montana is now entitled to receive $37,200 ($43,500 - $6,300)

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