Reduction of Partner by Retirement
Reduction of Partner by Retirement
Reduction of Partner by Retirement
1. On June 30, 20CY, the condensed balance sheet for the partnership of Eddy,
Fox, and Grimm together with their respective profit and loss sharing
percentage, was as follows:
Assets, net of
liabilities 320,000
Eddy decided to retire from the partnership and by annual mutual agreement is
to be paid 180,000 out of partnership funds for his interest. Total goodwill
implicit in the agreement is to be recorded. After Eddy’s retirement, what are
the capital balances of the other partners?
__Fox__ __Grimm__
108,000 72,000
Fox Grimm
Since the problem identified that total goodwill implicit in the agreement is
to be recorded, the excess of the amount received by Eddy over his capital
balance represent his share in the total goodwill to be recognized.
Accordingly, Fox and Grimm will share in the total goodwill based on their
respective profit and loss percentage.
2. Cen, Deng and Lala are partners with capital balances on 31 December
20CY of 300,000, 300,000 and 200,000 respectively. Profits are shared
equally. Lala wishes to withdraw and it is agreed that she is to take certain
furniture and fixture with second hand value of 50,000 and a note for the
balance of her interests. The furniture and fixtures are carried in the books
at 65,000. Brand new, the furniture and fixtures may cost 80,000. Lala’s
acquisition of the second-hand furniture will result to:
P65, 000
50, 000
P15, 000
Amy, Bea and Cat share profits and losses in the ratio of 3:2:1, respectively. It
was agreed among the partners that Amy retires from the partnership and the
partnership’s assets to be adjusted to their fair value of 210,000. The partner’s
further agreed to pay Amy 64,000 cash for the total interests in the partnership.
92, 000
5. Davis has decided to retire from the partnership of Davis, Eiser, and
Foreman. The partnership will pay Davis P200,000. Goodwill is to be
recorded in the transaction as implied by the excess payment to Davis. A
summary balance sheet for the Davis, Eiser, and Foreman partnership
appears below. Davis, Eiser, and Foreman share profits and losses in a ratio
of 1:1:3, respectively.
Assets
Cash 75,000
Inventory 82,000
Marketable securities 38,000
Land 150,000
Building-net 255,000
Total assets 600,000
Equities
Davis, capital 160,000
Eiser, capital 140,000
Foreman, capital 300,000
Total equities 600,000
What partnership capital will Foreman have after Davis retires?
360,000