Final answer:
The capital balances of Donald and Todd after Anne's retirement and payment using the bonus method are not precisely matching any given options. If we calculate by deducting the excess payment as a bonus proportionally from their capitals, Donald would have $34,000, and Todd would have $18,000. It appears the question or the answer options may contain an error or need clarification.
Step-by-step explanation:
The question involves calculating the adjusted capital balances of remaining partners in a business after one partner retires. The method used to adjust the capital accounts is the bonus method. In this scenario, Anne retires and receives a payment which results in reallocation of capital among the remaining partners according to their profit and loss sharing ratios.
Initial capital balances are: Donald - $40,000, Anne - $50,000, and Todd - $30,000. Anne is paid $80,000 upon retirement, thus the excess payment of $30,000 over her capital balance is treated as a bonus and deducted from the remaining partners' capital accounts according to their profit and loss sharing ratios - Donald's (20%) and Todd's (40%).
Calculation:
Donald's share of the bonus: $30,000 * 20% = $6,000
Todd's share of the bonus: $30,000 * 40% = $12,000
Subtracting the bonus from their initial capital balances:
Donald's new capital balance = $40,000 - $6,000 = $34,000
Todd's new capital balance = $30,000 - $12,000 = $18,000
However, these figures are not listed in the given options, indicating a potential misunderstanding in the question statement or the need for further clarification.