Partnership

The following is the current balance sheet for a local partnership of doctors:

Cash and current assets	$	50,000	Liabilities	$	90,000
Land		290,000	A, capital		70,000
Building and equipment (net)		220,000	B, capital		90,000
			C, capital		140,000
			D, capital		170,000
Totals	$	560,000	Totals	$	560,000

The following questions represent independent situations:

1. E is going to invest enough money in this partnership to receive a 20 percent interest. No goodwill or bonus is to be recorded. How much should E invest?
2. E contributes $120,000 in cash to the business to receive a 20 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?
3. 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 original partners share all profits and losses equally. After E makes this investment, what are the individual capital balances?
4. E contributes $88,000 in cash to the business to receive a 22 percent interest in the partnership. No goodwill or other asset 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?
5. C retires from the partnership and, as per the original partnership agreement, is to receive cash equal to 130 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: