Question

A partnership has the following capital balances with partners' profit and loss percentages indicated parenthetically: Burks...

A partnership has the following capital balances with partners' profit and loss percentages indicated parenthetically: Burks (35%) $ 280,000 Donovan (40%) 300,000 Watkins (25%) 170,000 Ranzilla agrees to pay a total of $245,000 directly to these three partners to acquire a 25 percent ownership interest from each. The partnership will record goodwill based on the new partner's payment. What is Donovan’s capital balance after the transaction?

  • $398,000

  • $392,000

  • $294,000

  • $225,000

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution:

Capital invested by Ranzilla for 25% interest = $245,000

Total capital of partnership = $245,000 / 25% = $980,000

Existing capital of partnership = $280,000 + $300,000 + $170,000 = $750,000

Goodwill to be recorded = $980,000 - $750,000 = $230,000

Donovan share in goodwill = $230,000*40% = $92,000

Donovan capital after recording the goodwill = $300,000 + $92,000 =$392,000

Donovan’s capital balance after the transaction of admission of new partner = $392,000 - ($392,000*25%) = $294,000

Hence 3rd option is correct.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The E.N.D. partnership has the following capital balances as of the end of the current year:...
The E.N.D. partnership has the following capital balances as of the end of the current year: Pineda $ 280,000 Adams 250,000 Fergie 240,000 Gomez 230,000 Total capital $ 1,000,000 a. Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $289,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners? pineda: adams: gomez: b. Assume that the partners share...
The partnership of Matteson, Richton, and O’Toole has existed for a number of years. At the...
The partnership of Matteson, Richton, and O’Toole has existed for a number of years. At the present time the partners have the following capital balances and profit and loss sharing percentages: Partner Capital Balance Profit and Loss Percentage Matteson $ 215,600 30 % Richton 224,400 45 O’Toole 225,000 25 O’Toole elects to withdraw from the partnership, leaving Matteson and Richton to operate the business. Following the original partnership agreement, when a partner withdraws, the partnership and all of its individual...
Pam and John are partners in PJ’s partnership, having capital balances of $120,000 and $40,000, respectively,...
Pam and John are partners in PJ’s partnership, having capital balances of $120,000 and $40,000, respectively, and share income in a ratio of 3:1. Gerry is to be admitted into the partnership with a 20 percent interest in the business. Required For each of the following independent situations, first record Gerry’s admission into the partnership and then specify and briefly explain why the accounting method used in that situation is GAAP or non-GAAP. Gerry invests $50,000, and goodwill is to...
The E.N.D. partnership has the following capital balances as of the end of the current year:...
The E.N.D. partnership has the following capital balances as of the end of the current year: Pineda $ 310,000 Adams 280,000 Fergie 270,000 Gomez 260,000 Total capital $ 1,120,000 Answer each of the following independent questions: Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $312,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners? Assume that the...
The E.N.D. partnership has the following capital balances as of the end of the current year:...
The E.N.D. partnership has the following capital balances as of the end of the current year: Pineda $ 320,000 Adams 280,000 Fergie 250,000 Gomez 230,000 Total capital $ 1,080,000 a. Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $305,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners? Assume that the partners share profits and losses 4:3:2:1,...
The partnership of Matteson, Richton, and O’Toole has existed for a number of years. At the...
The partnership of Matteson, Richton, and O’Toole has existed for a number of years. At the present time the partners have the following capital balances and profit and loss sharing percentages: Partner Capital Balance Profit and Loss Percentage Matteson $ 174,800 30 % Richton 205,200 50 O’Toole 195,000 20 O’Toole elects to withdraw from the partnership, leaving Matteson and Richton to operate the business. Following the original partnership agreement, when a partner withdraws, the partnership and all of its individual...
A partnership of attorneys in the St. Louis, Missouri, area has the following balance sheet accounts...
A partnership of attorneys in the St. Louis, Missouri, area has the following balance sheet accounts as of January 1, 2015: Assets . . . . . . . . . . . . . . . . . . . . . $320,000 Liabilities . . . . . . . . . . . . . . . . . . $120,000 Athos, capital . . . . . . . . . . . . . ....
The partnership of Banks, Barlow, Buell and Buford show the following balances in their Capital accounts:...
The partnership of Banks, Barlow, Buell and Buford show the following balances in their Capital accounts: Banks, capital 150,000 Barlow, capital 150,00 buell, capital 200,000 buford, capital 200,000 total 700,000 Burnside contributes $150,000 in cash to the partners for a 20% interest in the partnership. Good will is to be recorded. The four original partners share profits/losses according the the following ratio: 20:20:30:30. A. Determine the amount of Goodwill inherent in this transaction B. Prepare the Capital Account Analysis showing...
The partnership of Matteson, Richton, and O’Toole has existed for a number of years. At the...
The partnership of Matteson, Richton, and O’Toole has existed for a number of years. At the present time the partners have the following capital balances and profit and loss sharing percentages: Partner Capital Balance Profit and Loss Percentage Matteson $ 78,750 35 % Richton 131,250 45 O’Toole 110,000 20 O’Toole elects to withdraw from the partnership, leaving Matteson and Richton to operate the business. Following the original partnership agreement, when a partner withdraws, the partnership and all of its individual...
A partnership of attorneys in the St. Louis, Missouri, area has the following balance sheet accounts...
A partnership of attorneys in the St. Louis, Missouri, area has the following balance sheet accounts as of January 1, 2018: Assets $ 370,000 Liabilities $ 116,000 Athos, capital 98,000 Porthos, capital 88,000 Aramis, capital 68,000 According to the articles of partnership, Athos is to receive an allocation of 50 percent of all partnership profits and losses while Porthos receives 30 percent and Aramis, 20 percent. The book value of each asset and liability should be considered an accurate representation...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT