Martel, Tusk, and Davis are partners with present capital balances of $40,000, $50,000, and $20,000, respectively. The partners share profits and losses according to the following percentages: 60% for Martel, 30% for Tusk, and 10% for Davis. Frank is to join the partnership upon contributing $40,000 to the partnership in exchange for a 25% interest in capital and a 20% interest in profits and losses. An appraisal of the existing partnerships' assets reveals the following:
$\begin{array}{ll}
\text { Accounts Receivable } & \$ 20,000 \text { overvalued } \
\text { Inventory } & \$ 10,000 \text { overvalued } \
\text { Land } & \$ 10,000 \text { undervalued } \
\text { Building } & \$ 15,000 \text { undervalued }
\end{array}$ Required:
Calculate the capital balances for each individual in the new partnership assuming use of the bonus and goodwill methods.

Question

Martel, Tusk, and Davis are partners with present capital balances of $40,000, $50,000, and $20,000, respectively. The partners share profits and losses according to the following percentages: 60% for Martel, 30% for Tusk, and 10% for Davis. Frank is to join the partnership upon contributing $40,000 to the partnership in exchange for a 25% interest in capital and a 20% interest in profits and losses. An appraisal of the existing partnerships' assets reveals the following:
 $\begin{array}{ll}
\text { Accounts Receivable } & \$ 20,000 \text { overvalued } \
\text { Inventory } & \$ 10,000 \text { overvalued } \
\text { Land } & \$ 10,000 \text { undervalued } \
\text { Building } & \$ 15,000 \text { undervalued }
\end{array}$ Required:
Calculate the capital balances for each individual in the new partnership assuming use of the bonus and goodwill methods.

Quizplus · Accepted Answer

The Answer of Martel, Tusk, and Davis are partners with present capital balances of $40,000, $50,000, and $20,000, respectively. The partners share profits and losses according to the following percentages: 60% for Martel, 30% for Tusk, and 10% for Davis. Frank is to join the partnership upon contributing $40,000 to the partnership in exchange for a 25% interest in capital and a 20% interest in profits and losses. An appraisal of the existing partnerships' assets reveals the following:
 $\begin{array}{ll}
\text { Accounts Receivable } & \$ 20,000 \text { overvalued } \
\text { Inventory } & \$ 10,000 \text { overvalued } \
\text { Land } & \$ 10,000 \text { undervalued } \
\text { Building } & \$ 15,000 \text { undervalued }
\end{array}$ Required:
Calculate the capital balances for each individual in the new partnership assuming use of the bonus and goodwill methods.

Martel, Tusk, and Davis Are Partners with Present Capital Balances