Alpha and Beta are partners who share income in the ratio of 1:2 and have capital balances of $34,200 and $88,500, respectively, at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $80,700. What amount of loss on realization should be allocated to Alpha

Alpha and Beta

The amount of loss on realization that should be allocated to Alpha is:

$14,000.

Explanation:

a) Data and Calculations:

                                                Alpha    Beta         Total

Sharing ratio =                           1          :   2

Capital balances               $34,200   $88,500   $122,700

Cash balance =                                                     $80,700

Loss on realization = $42,000 ($122,700 - 80,700)

Loss sharing:

Alpha = $42,000 * 1/3 =  ($14,000)

Beta = $42,000 * 2/3 =                    ($28,000)

Cash refund                    $20,200   $60,500    ($80,700)

b) After sharing the loss (reduction in their capital balances against the available cash) in their profit and loss sharing ratios, their capital balances will be reduced by their respective amounts of loss.  Therefore, the cash each partner is entitled to will become equal to the cash available, as depicted above.

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.