Problem
P, R, and D have the following capital balances; $80,000, $100,000 and $60,000, respectively. The partners share profits and losses 20%, 40%, and 40%, respectively.
Required (show all your calculations):
1. R retires and is paid $160,000 based on an independent appraisal of the business. If the goodwill method is used (assume all capital accounts are revalued), what is the capital balance of P?
2. R retires and is paid $160,000 based on an independent appraisal of the business. If the goodwill method is used (assume all capital accounts are revalued), what is the capital balance of D?
3. What is the total partnership capital after R retires receiving $160,000 and using the goodwill method (assume all capital accounts are revalued)?
4. R retires and is paid $160,000 based on an independent appraisal of the business. If the bonus method is used, what is the capital balance of P?
5. R retires and is paid $160,000 based on an independent appraisal of the business. If the bonus method is used, what is the capital balance of D?
6. What is the total partnership capital after R retires receiving $160,000 and using the bonus method?