Question

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

Pineda $210,000

Adams $190,000

Fergie $180,000

Gomez $170,000

Total capital $750,000

a. Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $211,000 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?

Capital Balance

Pineda

Adams

Gomez

b. Assume that the partners share profits and losses 4:3:2:1, respectively. Pineda retires and is paid $335,000 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.)

Capital Balance

Adams

Fergie

Gomez

Answer 1

A. Capital Balance

Pineda $202,125

Adams $202,125

Gomez $134,750

B. Capital Balance

Adams $325,500

Fergie $217,000

Gomez $108,500

Explanation:

Total Capital balance = $750,000

A. Bonus method

Ratio 3:3:2:2

$750000 - $211000( fergie)

= $539,000

Capital Balance.

Pineda = 3/8 × 539000 = $202125

Adams = 3/8 × 539000 = $202125

Gomez = 2/8 × 539000 = $134,750

B Goodwill method

Total Capital balance = $750,000

Ratio 4:3:2:1

$750,000 + $335,000 = $1085000

Capital Balance

Adams = 3/10× $1085000 =$325500

Fergie = 2/10 × $1085000 = $217,000

Gomez = 1/10 × $1085000 = $108,500