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Formation and Operation of partnership

Following is a current balance sheet for a local partnership of doctors:

Cash and current assets $30,000
Land...............................................................180,000
Building and Equipment (net).................100,000
Totals.............................................................$310,000

Liabilites......................................................$40,000
A. Capital.......................................................20,000
B, capital........................................................40,000
C, Capital........................................................90,000
D, Capital.......................................................120,000
Totals............................................................$310,000

The Following questions represent independent situations:

A. E is going to invest enough money in this partnership to received a 25 percent interest. No good-will or bonus is to be recorded. How much shuold E invest?

B. E contributes $36,000 in cash to the business to receive 10 percent interest in the partnership Goodwill is to be recorded. Profits and losses have previously been split according to the following percentages: A, 30 percent, B,10 percent; C, 40 percent; and D, 20 percent. After E makes this investment , what are the individual capital balances?

C. E contributes $42,000 in cash to the business to receive a 20 percent interest in the partnership. Goodwill is to be recorded. The four partners share all profits and losses equally. After E makes this investment, what are the individual capital balances?

D. E contributes $55,000 in cash to the business to receive a 20 percent interest in the partnership. No goodwill or other assets revaluation is to be recorded. Profits and losses have previously been split according to the following percentages: A, 10 percent; B, 30 percent; C, 20 percent; and D, 40 percent. After E makes this investment, what are the individual capital balances?

E. C retires from the partnershio and, as per the original partnership agreement, is to receive cahs equal to 125 percent of her final capital balance. No goodwill or other asset revaluation is to be recognized. All partners share profits and losses equally. After the withdrawal, what are the individual capital balances of the remaining partners?

Solution Summary

The solution explains some calculations relating to partnerships

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