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.)
| 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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