The Year-End Balance Sheet and Residual Profit and Loss Sharing

question 50

Multiple Choice

The year-end balance sheet and residual profit and loss sharing percentages for the Gary,Harold,and Ivan partnership on December 31,2014,are as follows: The partners agree to liquidate the business and distribute cash when it becomes available.A cash distribution plan is developed with vulnerability rankings for the Gary,Harold and Ivan partnership.After outside creditors are paid,the cash available will initially go to

• A)Gary in the amount of $20,000.
• B)Harold in the amount of $50,000.
• C)Harold in the amount of $70,000.
• D)Ivan in the amount of $40,000.

---

Definitions:

Transfer Price

The price at which divisions of a company transact with each other, often used for the sale of goods or services within the company.

Variable Cost

Costs that vary directly with the level of production or sales, such as raw materials and direct labor.

Ample Capacity

A situation where a company has enough or more than enough capacity to meet its current production or operation needs.

Transfer Price

The price at which goods and services are sold between divisions within the same company or between controlled or related entities.