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?

Question

Kash Wilson

Business

10 July, 15:55

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?

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Answers (1)

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Giancarlo Simpson · Answer 1

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.