3 Item 2 Item 2 3 points The E.N.D. partnership has the following capital balanc
ID: 2580264 • Letter: 3
Question
3
Item 2
Item 2 3 points
The E.N.D. partnership has the following capital balances as of the end of the current year:
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 $203,000 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 $290,000 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.)
Pineda $ 190,000 Adams 170,000 Fergie 160,000 Gomez 150,000 Total capital $ 670,000Explanation / Answer
1st part.
Fergie is paid $203,000.
his capital balance is $160,000
good will paid to fergie = $203,000 - $160,000 =>$43,000
if goodwill method is used ,
total goodwill will be = goodwill paid to fergie / share of fergie
here,
share of Fergie = 2 /10 .............(since 3:3:2:2 is the profit sharing ratio)
=> total goodwill be = $43,000 / (2/10)
=>$43,000 /0 .20
=>$215,000.
now,
Pineda's share of good will = $215,000 * 3 /10 =>$64,500.
Adam's share of goodwill = $215,000 *3/10 =>$64,500
Gomez's share of goodwill= $215,000*2/10 =>$43,000.
The following is the balances of remaining partners:
2 nd part.
$290,000 is paid to Pineda
capital account balance of Pineda = $190,000
=>goodwill = $290,000 - 190,000 =>$100,000.
as bonus method is used.
this good will of $100,000 paid to Pineda is divided among contnuing partners in their profit sharing ratio.
the new profit sharing after Pineda retires is 3:2:1
Adams ($100,000 * 3/6) =>$50,000
Fergie ($100,0000*2/6) =>$33,333.33
Gomez ($100,000*1/6) =>$16,666.67
Gomez ($150,000 - 16,666.67)
Pineda ($190,000 +64,500) $254,500 Adams ($170,000 +64,500) $234,500 Gomez ($150,000 +43,000) $193,000 Total capital $682,000Related Questions
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