Question

Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively. The partners share profits and losses 20%, 40%, and 40% respectively.Anne retires and is paid $80,000 based on the terms of the original partnership agreement. If the bonus method is used, what is the capital of the remaining partners?

Answer 1

Answer:

Total partnership capital after Anna retires is $40,000

Explanation:

The $30,000 bonus is deducted from the remaining partners according to their relative loss and profit ratio. Donald=20% and Todd=40% which is a 1/3, 2/3 split. Donald =$40,000-(1/3 x $30,000)=$30,000

Todd =$30,000 -(2/3 X $30000) =$10,000.