Peter, Roberts, and Dana have the following capital balances; $80,000, $100,000 and $60,000, respectively. The partners share profits and losses 20%, 40%, and 40% respectively. What is the total partnership capital after Roberts retires receiving $160,000 and using the goodwill method?
A) $290,000.
B) $176,000.
C) $80,000.
D) $120,000.
E) $230,000.
Roberts receives an additional $60,000 above her capital balance. Since she is assigned 40 percent of all profits and losses, this extra allocation indicates total goodwill of $150,000, which must be split among all partners.
40% of Goodwill = $60,000
)40 G = $60,000
G = $150,000
Total capital is $240,000 + goodwill $150,000 = $390,000.
Roberts receives $160,000 and partnership capital is then $390,000-$160,000 = $230,000.

Question

Quizplus · Accepted Answer

Roberts receives an additional $60,000 above her capital balance. Since she is assigned 40 percent of all profits and losses, this extra allocation indicates total goodwill of $150,000, which must be split among all partners. Therefore, the new total partnership capital after Roberts retires is $240,000 + $150,000 = $390,000. As Roberts receives $160,000, the remaining partnership capital is $390,000 - $160,000 = $230,000. Thus, the answer is E, $230,000.

Peter, Roberts, and Dana Have the Following Capital Balances; $80,000