Alexander and Bell agreed to liquidate their partnership. You have been asked to assist them in this process, and you prepare the following balance sheet for the date of the beginning of the liquidation. The profit sharing percentages are in parentheses next to the capital account balances.

Bell is demanding that the loan to her be paid before any cash is distributed to Alexander. Alexander feels the available cash should be paid to him until his capital account is reduced to \(\$ 40,000\), the same as Bell's. Alexander will then pay the loan receivable to the partnership with the cash received. You have been asked to reconcile the argument.
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How would you advise in this case?

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Cash Loan Receivable from Alexander Other Assets Total Accounts Payable Loan Payable to Bell Alexander, Capital (50%) Bell, Capital (50%) Total $ 40,000 10,000 200,000 $250,000 $ 30,000 100.000 80.000 40.000 $250,000