Verst, Brown and Sullivan have a partnership. Pertinent information is as follows: Sullivan retires and the partnership pays him $35,000. What is the balance in Verst's capital account after the sale assuming this transaction was accounted for using the bonus method?

Question

Verst, Brown and Sullivan have a partnership. Pertinent information is as follows:  Sullivan retires and the partnership pays him $35,000. What is the balance in Verst's capital account after the sale assuming this transaction was accounted for using the bonus method?

Quizplus · Accepted Answer

Bonus paid to Sullivan = 35,000 - 30,000 = 5,000
Amount of bonus allocated to Verst 5,000 x 25/75 = 1,667
New balance = 50,000 - 1,667 = 48,333

Verst, Brown and Sullivan Have a Partnership