Te ABCD Pataerhiphas the llowing balce sbeet at euar 1, 2017, peior to he admiss
ID: 2601572 • Letter: T
Question
Te ABCD Pataerhiphas the llowing balce sbeet at euar 1, 2017, peior to he admissioe of sew parat Eden 539 0CCLiabiies 552,000 $234,000Adams, Captal 26,000 $130 000Bames, Capital 52,000 Condas, Capital $117,000 Davis, Capital 155,000 $403,000 Land Bulding and equipment 403,000 1. Eden contritmes $49,010 into the partnership for a 25% interest. The four original partners share profits and losses equally Using the beans method, determine the balances for each of the ie parcoars after Eden joins ce partoership Eden contributed S124,000 is cash to busaess to receive a 2gei interest in the Partnership. Coodwill gas to be recorded. The four origiul partners shared all protes and leases equally. Afrer Eden made his inrestment, what were the individual capital balances? 3 Eden acquired a 20% interest in the partnership by contributing a total of STi 500 directly te the other four partners. No goodwill is to be recorded. Profits and lesses have premusly been split according to the folle.ag peitintages: Adams, 15%. Barnes, 35%, Cerdas, 30%, and Davis, 20%. Afar Eden made his investment. what withe individual capital balaces?Explanation / Answer
Solution:
Ratio of profit between 4 original partners = 1:1:1:1
Total capital after new capital introduced by Eden = $351,000 + $49,000 = $400,000
Eden share in Partnership = 25%
Therefore required share of capital of Eden = 400000 * 25% = $100,000
As capital introduced by Eden is lesser by $51,000 therefore old partner capital share will be given to Eden in their profit sharing ratio i.e. 1:1:1:1
Eden new balance in capital = $100,000
Adam new balance in capital = 26,000 – (51,000/4) = $13,250
Bames new balance in capital = 52000 – (51000/4) = $39,250
Cordas new balance in capital = 117000 – (51000/4) = $104,250
Devis new balance in capital = 156000 – (51000/4) = $143,250
Ratio of profit between 4 original partners = 1:1:1:1
Capital Introduced by Eden = $124,000
Eden share in Partnership = 20%
Therefore required partnership capital on the basis of capital introduced by Eden = $124,000/20% = $620,000
Total capital after new capital introduced by Eden before goodwill = $351,000 + $124,000 = $475,000
Therefore Goodwill = $620,000 - $475,000 = $145,000
Goodwill will be distributed to old partners in ration of 1:1:1:1
Eden new balance in capital = $124,000
Adam new balance in capital = 26,000 + (145,000/4) = $62,250
Bames new balance in capital = 52000 + (145,000/4) = $88,250
Cordas new balance in capital = 117000 + (145,000/4) = $153,250
Devis new balance in capital = 156000 + (145,000/4) = $192,250
As Eden acquired 20% interest in the partnership by contributing $71,500 directly to other partners, therefore Eden share of capital will be 71,500 and same will be done by reducing other Partners capital in their profit sharing ratio.
Eden new balance in capital = $71,500
Adam new balance in capital = 26,000 - (71,500*15/100) = $15,275
Bames new balance in capital = 52000 - (71,500*35/100) = $26,975
Cordas new balance in capital = 117000 - (71,500*30/100) = $95,550
Devis new balance in capital = 156000 + (71,500*20/100) = $141,700
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