Ellery Stevens, senior partner in a rapidly growing local CPA firm, has decided to retire. His share

Question:

Ellery Stevens, senior partner in a rapidly growing local CPA firm, has decided to retire. His share in the firm's profits and losses is 30 percent and his capital account, before considering drawings of $50,000, has a balance of $240,000. Total capital of the firm is $780,000, before considering total drawings of $180,000. Under the agreement, Stevens will receive $250,000 upon retirement.

Required
a. Calculate the bonus to Stevens and the total capital of the firm after Stevens' retirement.
b. What accounts will change after Stevens' retirement, and by what amounts, if the partial approach is used?
c. If the total method is used, calculate the amount of recognized and the total capital of the firm after Stevens' retirement.
Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...