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22 February, 22:45

In the RST partnership, Ron's capital is $80,000, Stella's is $75,000, and Tiffany's is $50,000. They share income in a 3:2:1 ratio, respectively. Tiffany is retiring from the partnership. Each of the following questions is independent of the others.

Refer to the above information. Tiffany is paid $60,000, and no goodwill is recorded. What is the Ron's capital balance after Tiffany withdraws from the partnership?

A. $74,000

B. $71,000

C. $75,000

D. $86,000

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  1. 22 February, 22:49
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    A. $74,000

    Explanation:

    Since in this question, Tiffany is retired so we have to find the new ratio which is shown below:

    As Tiffany take the shares of both the partners in 3: 2

    So, the new ratio would be

    Ron share = (3 : 5) * (1 : 6) = 3 : 30

    Stella share = (2 : 5) * (1 : 6) = 2 : 30

    So the ratio would be 3: 2

    The 1 : 6 is the Tiffany ratio

    Now the balance after Tiffany withdraws from the partnership equals to

    = Paid amount by Tiffany - Tiffany capital

    = $60,000 - $50,000

    = $10,000

    Ron's given amount = ($10,000 * 3 : 5) = $6,000

    So, Ron's capital balance equals to

    = Ron's capital - Ron's given amount

    = $80,000 - $6,000

    = $74,000
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