10.4 Pandov and Slavov have been partners for some years with the following profit-sharing arrangements:

Interest on capital accounts, 5 per cent Salaries: Pandov £20,000; Slavov £40,000 Share of balance: Pandov §; Slavov j.

The profit has been about £230,000 for the last few years. Their balance sheet as at 31 December 20X2 was as follows:
Capital Current accounts accounts £
£
£
Pandov 300,000 50,000 350,000 Slavov 100,000 150,000*
250,000 £400,000 £200,000 £600,000 Sundry assets less liabilities £600,000 Pandov proposes that Trubitsyn, who is at present a manager employed by the partner¬ ship at a salary of £80,000 per annum, be admitted as a partner from 1 January 20X3 and that the new profit-sharing arrangements should be:
Interest on capital accounts, 12 per cent Salaries: Pandov £20,000; Slavov £20,000; Trubitsyn £50,000 Share of balance: Pandov 40 per cent; Slavov 40 per cent; Trubitsyn 20 per cent.
If Trubitsyn’s total share of the profit falls below £70,000, the deficiency should be made up equally by the other two partners. Trubitsyn should introduce capital of £20,000. Goodwill should be calculated by using the ‘super profit’ method and the following esti¬ mates:
1. A fair charge for the management services provided by Pandov and Slavov is £120,000 per annum.
2. A rate of return of 12 per cent per annum on the net tangible assets can be expected.
3. The required rate of return on the ‘super profits’ is 16 per cent per annum.
Goodwill should not be recorded on the books and the necessary payments for goodwill should be made outside the partnership.
Required:

(a) A statement showing the required payments for goodwill.

(b) The profit and loss appropriation account for 20X3 based on the assumption that the profit will be the same as in 20X2.

(c) A report comparing the present positions of each of the three parties with that which would exist if the proposed changes were implemented.