Joined: 23 Oct 2009
Online Status: Offline Posts: 61
Posted: 16 Nov 2009 at 14:57 | IP Logged
in business structure problems, if capital contributions are given....then when should we consider it bec sometimes only loss % is applied diectly to loss for a particular partner without considering capital contribution...
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D, E, F, and G formed a general
partnership. Their written partnership agreement provides that the profits
will be divided so that D will receive 40%; E, 30%; F, 20%; and G, 10%. There
is no provision for allocating losses. At the end of its first year, the
partnership has losses of $200,000. Before allocating losses, the partners’
capital account balances are D, $120,000; E, $100,000; F, $75,000; and G,
$11,000. G refuses to make any further contributions to the partnership.
Ignore the effects of federal partnership tax law. What is G’s share of the
partnership losses?
Your answer is correct.
The partnership agreement, to the extent it allocates partnership losses
among partners, governs. Absent agreement (as here), a partner shares
losses in the same proportion (s)he shares profits. The partnership
agreement, to the extent it allocates partnership profits among partners,
governs. Thus, G’s share of the losses is 10% of $200,000.
Joined: 23 Oct 2009
Online Status: Offline Posts: 61
Posted: 16 Nov 2009 at 15:17 | IP Logged
also in below problem,
< http-equiv="Content-" content="text/; charset=utf-8">< name="ProgId" content="Word.">< name="Generator" content="Microsoft Word 12">< name="Originator" content="Microsoft Word 12">
D, E, F, and G formed a general
partnership. Their written partnership agreement provides that the profits
will be divided so that D will receive 40%; E, 30%; F, 20%; and G, 10%.
There is no provision for allocating losses. At the end of its first year,
the partnership has losses of $200,000. Before allocating losses, the
partners’ capital account balances are D, $120,000; E, $100,000; F, $75,000;
and G, $11,000. G refuses to make any further contributions to the
partnership. Ignore the effects of federal partnership tax law. After losses
are allocated to the partners’ capital accounts and all liabilities are paid,
the partnership’s sole asset is $106,000 in cash. How much will E receive on
dissolution of the partnership?
Your answer is correct.
Absent agreement, the loss is allocated in the same proportion as profits
(D, $80,000; E, $60,000; F, $40,000; G, $20,000). G’s excess over his/her
capital account balance ($9,000) must be allocated to the other partners in
the same ratio as that for sharing profits (4:3:2). Thus, $4,000 [$9,000 ×
(4 ÷ 9)] is allocated to D, $3,000 [$9,000 × (3 ÷ 9)] to E, and $2,000
[$9,000 × (2 ÷9)] to F. The $106,000 is allocated in full to the balance of
partnership capital accounts (D, $36,000; E, $37,000; F, $33,000). (how is this calculated)
Joined: 12 Nov 2009 Location: United States
Online Status: Offline Posts: 90
Posted: 18 Nov 2009 at 06:01 | IP Logged
It's given that the total loss is $200,000. E's share of that is 30% so that's $60,000. E's share of what he owes from G's loss is $3,000 so his total loss is $63,000. Subtract this from his capital account balance of $100,000 and you get $37,000.
By the way, don't let the $106,000 fool you into thinking extra steps are required. Not going to lie, it fooled me and I had to work the problem backwards. It's not separate from the capital
accounts. To prove this, add up all the capital accounts ($120,000,
$100,000, $75,000 and $11,000) and you get $306,000. Subtract the
$200,000 loss and you get $106,000. So that's where that number came
from.
__________________ AUD - 11/16/09 - 81
BEC - 01/15/10 - 80
FAR - October/November
REG - Not yet determined
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