Harry, Izzy, and Jake are partners who share income in a 6:4:2 ratio. Jake, whose capital balance is $40,000, retires from the partnership, and receives partnership assets.
Required
Determine the amount paid to Jake under each of the following assumptions:
a. The partial goodwill approach is used and $15,000 of goodwill is recorded.
b. The bonus method is used and Izzy's capital account is reduced by $20,000.
c. The total goodwill approach is used, and Harry's capital account increases by $30,000.

Question

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The Answer of Harry, Izzy, and Jake are partners who share income in a 6:4:2 ratio. Jake, whose capital balance is $40,000, retires from the partnership, and receives partnership assets.
Required
Determine the amount paid to Jake under each of the following assumptions:
a. The partial goodwill approach is used and $15,000 of goodwill is recorded.
b. The bonus method is used and Izzy's capital account is reduced by $20,000.
c. The total goodwill approach is used, and Harry's capital account increases by $30,000.

Harry, Izzy, and Jake Are Partners Who Share Income in a 6:4:2