The E.N.D. partnership has the following capital balances as of the end of the c
ID: 2491639 • Letter: T
Question
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?
b. Assume that the partners share profits and losses 4:3:2:1, respectively. Pineda retires and is paid $300,000 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.)
Explanation / Answer
Capital balance
Pienda
280,000
Adama
250,000
Fergie
240,000
Gomez
230,000
Share
3:3:2:2
Good will calculation
Amount paid to Fergie
289,000
Less Capital balance
240,000
Good will
49,000
Fergie share is 20%
Hence total goodwill = 49,000/20% = 245,000
Capital balance after withdrawal
Original balance
Goodwill
withdrwal
Final balance
Pienda
280,000
73,500
353,500
Adama
250,000
73,500
323,500
Fergie
240,000
49,000
(289,000)
0
Gomez
230,000
49,000
279,000
956,000
b.
Bonus Is 300,000 – 280,000 = 20,000 to be deducted from rest of the partners in the ratio of
3:2:1
So Adaman 250,000 - 20,000*3/6 = 240,000
Fergie 240,000 -20,000*2/6 = 233,333
Gomez 230,000 – 20,000*1/6 = 226,667
Pienda
280,000
Adama
250,000
Fergie
240,000
Gomez
230,000
Share
3:3:2:2
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