Question
Al, Bebe, Chris and Drew have the following partnership business: Assets Liabilities and equities Cash $55,000 Liabilities $40,000 Current assets 30,000 Al, capital 60,000
Al, Bebe, Chris and Drew have the following partnership business: Assets Liabilities and equities Cash $55,000 Liabilities $40,000 Current assets 30,000 Al, capital 60,000 Land 205,000 Bebe, capital 70,000 Building and Equip't 110,000 Chris, capital 90,000 Drew, capital 140,000 Total assets $400,000 Total Liab. and Eq's $400,000 The partners share profits and losses equally. Provide the partners' ending capital balances in each of the following independent situations. a. Edy is added to the partnership after contributing to the business. No goodwill or bonus is recorded. b. Edy contributes $100,000 in cash to the business and receives a 20% interest in the partnership. Edy's $100,000 investment is considered 20% of the new business's value, so goodwill may need to be recorded. (Edy's capital balance will be exactly $100,000.) $100,000 a. Edy is added to the partnership after contributing $100,000 to the business. No goodwill or bonus is recorded. b. Edy contributes $100,000 in cash to the business and receives a 20% interest in the partnership. Edy's $100,000 investment is considered 20% of the new business's value, so goodwill may need to be recorded. (Edy's capital balance will be exactly $100,000.) C. Edy is added to the partnership and receives 20% of each partner's $39,000 directly to each of interest in the business after paying the four partners, not into the business. No goodwill is recorded. d. Chris retires and has been paid 140% of his capital balance according to the terms of the original partnership agreement. The bonus method is used.
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