Question

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

Pineda $ 140,000

Adams 120,000

Fergie 110.000

Gomez 100.000 

Total capital  $470,000

Answer each of the following independent questions:

a. Assume that the partners share profits and losses 3.3.2.2, respectively. Fergie retires and is paid $140,000 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 $340,000 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 

Pineda 

Adams 

Gomez 

Adams 

Fergie 

Gomez

Answer 1

	E.N.D. Partnership
a)	Goodwill Method
	Calculation of Firms goodwill
	Amount paid to Fergie	$   1,40,000.00
	Less: Fergie's ending capital	$ -1,10,000.00
	Goodwill paid to Fergie	$       30,000.00
	Fergie's share in Profit & loss=(2/10)*100	20%
	Firms goodwill=($30000/20%)	$   1,50,000.00
	Goodwill will be distributed among partner's in their profit sharing ratio=30%,30%,20%,20%
	Particular	pineda	Adams	Fergie	Gomez	Total
	Existing Capital=(A)	$   1,40,000.00	$          1,20,000.00	$   1,10,000.00	$     1,00,000.00	$   4,70,000.00
	Firms goodwill distributed among partner's=(B)	$       45,000.00	$             45,000.00	$       30,000.00	$         30,000.00	$   1,50,000.00
	New Capital balance=(C )=(A)-(B)	$   1,85,000.00	$          1,65,000.00	$   1,40,000.00	$     1,30,000.00	$   6,20,000.00
	Less: Amount paid to Fergie=(D)			$ -1,40,000.00		$ -1,40,000.00
	Balance Capital=(C )-(D )	$   1,85,000.00	$          1,65,000.00	$                      -	$     1,30,000.00	$   4,80,000.00
		pineda	Adams	Fergie	Gomez
	Firms goodwill distributed among partner's	($150000*30%)	($150000*30%)	($150000*20%)	($150000*20%
b)	Bonus Method
	Calculation of Bonus Paid to pineda
	Amount paid to pineda	$   3,40,000.00
	Less: Existing Capital	$ -1,40,000.00
	Bonus paid to pineda	$   2,00,000.00
	Bonus Paid to pineda shared by other partner's in their profit sharing ratio(3/6),(2/6),(1/6)
	Particular	pineda	Adams	Fergie	Gomez	Total
	Existing Capital	$   1,40,000.00	$          1,20,000.00	$         1,10,000	$           1,00,000	$         4,70,000
	Amount amount bonus paid	$   2,00,000.00	$        -1,00,000.00	$           -66,667	$             -33,333	$                      -
	New Capital Balance	$   3,40,000.00	$             20,000.00	$             43,333	$               66,667	$         4,70,000
	Amount paid to pineda	$ -3,40,000.00				$       -3,40,000
	Balance Capital	$                      -	$             20,000.00	$             43,333	$               66,667	$         1,30,000
	Particular	pineda	Adams	Fergie	Gomez
	Amount amount bonus paid		($200000*3/6)	($200000*2/6)	($200000*1/6)