The E.N.D. partnership has the following capital balances as of the end of the c

Question

The E.N.D. partnership has the following capital balances as of the end of the current year:

Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $183,000 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 $345,000 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.)

The E.N.D. partnership has the following capital balances as of the end of the current year:

Explanation / Answer

Part 1)

Goodwill Method:

The value of goodwill is calculated with the use of following table:

_______

The capital balance of remaining three partners is calculated with the use of following table:

_______

Part 2)

Bonus Method:

As per the bonus method, the excess value paid to Fergie will be deducted from the remaining partners capital balances in their relative profit loss sharing ratio which is 3:3:2. The capital balance of remaining partners is calculated with the use of following table:

Amount Paid to Fergie 183,000 Less Capital Balance of Fergie 150,000 Excess Amount Paid to Fergie [A] 33,000 Fergie's Share in Profit and Losses (2/10) [B] 0.2 Total Goodwill [A/B] $165,000

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