Question

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 $ 290,000
Adams 250,000
Fergie 220,000
Gomez 200,000
Total capital $ 960,000

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 $253,000 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, respectively. Pineda retires and is paid $325,000 based on the terms of the original partnership agreement. If the bonus method is used, what is the capital balance of the remaining three partners? (Do not round your intermediate calculations. Round your final answers to the nearest dollar amounts.)

Homework Answers

Answer #1
A. If the goodwill method is used, what is the capital balance of the remaining three partners?
goodwill (253000-220000)/0.2) 165000
Goodwill old capital new capital paid net new capital
Pineda 49500 290000 339500
339500
Adams 49500 250000 299500 299500
Fregie 33000 220000 253000 -253000 0
Gomez 33000 200000 233000 233000
165000 960000
B. If the bonus method is used, what is the capital balance of the remaining three partners?
bonus (325000-290000) 35000
bonus(allocated in profit ratio) old capital new capital net new capital
Pineda 35000 290000 -325000 0
Adams -17500 250000 232500 232500
Fregie -11666.67 220000 208333.3 208333
Gomez -5833.33 200000 194166.7 194167
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