Business College

The E.N.D. partnership has the following capital balances as of the end of the current year: Pineda $ 180,000 Adams 160,000 Fergie 150,000 Gomez 140,000 Total capital $ 630,000 Answer each of the following independent questions: Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $183,000 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

Answers

Answer 1

Answer:  

Goodwill Calculation

Amount paid to Fergie  $183,000

Less: Fergie Capital        $150,000

Goodwill                          $33,000

Fergie's share is 20% in Goodwill. Total Goodwill = $33,000 / 20% = $165,000

        Calculation of Capital Balance After Fergie's retirement

                                    Pineda       Adams       Fergie    Gomez      Total

Opening Balance     $180,000  $160,000   $150,000 $140,000 $630,000

Add: Goodwill             $49,500   $49,500    $33,000   $33,000   $165,000

(Distributed - 3:3:2:2)

Less: Amount Paid            -                -           ($183,000)     -           ($183,000)

Balance                       $229,500  $209,500        -       $173,000  $612,000

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