Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively. The partners share profits and losses 20%, 40%, and 40% respectively.
Anne retires and is paid $80,000 based on the terms of the original partnership agreement. If the bonus method is used, what is the capital of the remaining partners?

Question

Quizplus · Accepted Answer

The $30,000 bonus is deducted from the remaining partners according to their relative profit and loss ratio. Donald = 20% and Todd = 40% which is a 1/3, 2/3 splitDonald = $40,000 - (1/3 × $30,000) = $30,000Todd = $30,000 - (2/3 × $30,000) = $10,000

Donald, Anne, and Todd Have the Following Capital Balances; $40,000