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The Balance Sheet of Ryan,James and Peter Firm as at 30

question 57

Multiple Choice

The balance sheet of Ryan,James and Peter firm as at 30 June 2017 is given below. $\begin{array}{|l|l|l|l|}\hline{\text { Assets }} & & {\text { Liabilities }} & \\\hline \text { Cash } & \$ 16,000 & \text { Accounts payable } & \$ 17,000 \\\hline \text { Accounts receivable } & 11,000 & \text { Other liabilities } & 22,000 \\\hline \text { Furniture } & 10,000 & \text { Partner's'equity } & \\\hline \text { Equipment } & 15,000 & \text { Ryan, capital } & 12,000 \\\hline \text { Other assets } & 11,000 & \text { Peter, capital } & 11,000 \\\hline & & \text { James, capital } & 1000 \\\hline\text { Total assets }&\$63,000&\text { Total liabilities and partners' equity }&\$63,000\\\hline\end{array}$ Ryan,Peter and James share profits in the ratio 3:2:1.They have decided to liquidate the partnership with immediate effect.The furniture and the equipment were sold at a cumulative loss of $6000.The accounts receivable were duly received in cash and the other assets were written off as worthless.The accounts payable and other liabilities were paid off at book value.James argued that he should receive a portion of the remaining cash,but Peter and Ryan argued otherwise.How much cash should James receive or pay?

Definitions:

Purchase Method

An accounting method used in business combinations where the acquirer's assets, liabilities, and contingent liabilities are recorded at their fair values at the acquisition date.

Subsidiary's Assets

Assets owned by a company that is completely or majority-owned by another company, known as the parent company.

Statutory Amalgamation

A legal process that combines two or more companies into one new entity, typically under specific legal frameworks.

Acquisition Method

An accounting technique used to consolidate the financial statements of two companies after an acquisition.