The E.N.D. partnership has the following capital balances as of the end of the c
ID: 2490987 • Letter: T
Question
The E.N.D. partnership has the following capital balances as of the end of the current year: Pineda $ 290,000 Adams 250,000 Fergie 220,000 Gomez 200,000 Total capital $ 960,000 a. Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $253,000 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 $325,000 based on the terms of the original partnership agreement. If the bonus method is used, what is the capital balance of the remaining three partners? (Do not round your intermediate calculations. Round your final answers to the nearest dollar amounts.)
Explanation / Answer
a) The E N D partnership firm Partners Profit/Loss Share(%) Closing Balance of capital account.($) Pineda 30% 2,90,000.00 Adams 30% 2,50,000.00 Fergie 20% 2,20,000.00 Gomez 20% 2,00,000.00 9,60,000.00 $ Total payment made to Fergie 2,53,000.00 Less: Closing Capital -2,20,000.00 Share of Goodwill 33,000.00 The goodwill,$ 33,000 payable to Fergie would be shared by the remaining partners in their ratio,3:3:2 $ Pineda ($ 33000 x 3/8) 12375 Adams ($ 33000 x 3/8) 12375 Gomez ($ 33000 x 2/8) 8250 33000 Closing capital of remaining partners $ $ Pineda (290,000-12375) 2,77,625.00 Adams (250,000-12375) 2,37,625.00 Gomez (200,000-8250) 1,91,750.00 7,07,000.00 b) Profit/Loss sharing ratio is 4:3:2:1 $ Total payment made to Pineda 3,25,000.00 Less: Closing Capital of Pineda 2,90,000.00 Share of Bonus 35,000.00 The above bonus shall be shared by the remaining partners in their existing ratio, 3:2:1 $ Adams ($ 35,000 x 3/6) 17500 Fergie ($ 35,000 x 2/6) 11667 Gomez ($ 35,000 x 1/6) 5833 Closing capital of remaining partners $ $ Adams (250,000-17500) 2,32,500 Fergie (220,000-11667) 208333 Gomez (200,000-5833) 194167 6,35,000
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