Ryan and Peter share profits in the ratio 3:2. They have decided to liquidate the partnership. The accounts payable were settled at $17,000 due to the poor financial condition of the partnership firm. As a result, Ryan's capital account will be credited by ________.
The balance sheet of Ryan and Peter's partnership as of December 31, 2018, is given below.
A) $10,200
B) $9000
C) $1800
D) $3000
C) $1800
When liabilities are settled at less than book value, the resulting gain is allocated to the
partners in their existing profit-sharing ratio.
Book value of payables $20,000
Cash settlement price 17,000
Gain on settlement 3000
Ryan's share of gain (3 / 5 × $3000) $1800
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