Frank, George, and Scott are partners with capital accounts of $160,000, $120,000, and $210,000, respectively. Scott has informed Frank and George that he must withdraw from the partnership. The partners have agreed that the partnership will purchase Scott’s ownership interest for $250,000. The profit and loss residual ratios before Scott’s retirement are 45 percent, 30 percent, and 25 percent, respectively. How much will Frank’s capital account be reduced if the bonus method is applied for the withdrawal?

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter14: Choice Of Business Entity—operations And Distributions
Section: Chapter Questions
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Frank, George, and Scott are partners with capital accounts of $160,000, $120,000, and $210,000, respectively. Scott has informed Frank and George that he must withdraw from the partnership. The partners have agreed that the partnership will purchase Scott’s ownership interest for $250,000. The profit and loss residual ratios before Scott’s retirement are 45 percent, 30 percent, and 25 percent, respectively. How much will Frank’s capital account be reduced if the bonus method is applied for the withdrawal?

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