The following is the current balance sheet for a local partnership of doctors: Cash and current assets $ 80,000 Liabilities $ 80,000 Land 240,000 A, capital 60,000 Building and equipment (net) 190,000 B, capital 80,000 C, capital 130,000 D, capital 160,000 Totals $ 510,000 Totals $ 510,000
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
The following is the current balance sheet for a local
| Cash and current assets | $ | 80,000 | Liabilities | $ | 80,000 |
| Land | 240,000 | A, capital | 60,000 | ||
| Building and equipment (net) | 190,000 | B, capital | 80,000 | ||
| C, capital | 130,000 | ||||
| D, capital | 160,000 | ||||
| Totals | $ | 510,000 | Totals | $ | 510,000 |
The following questions represent independent situations:
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E is going to invest enough money in this partnership to receive a 20 percent interest. No
goodwill or bonus is to be recorded. How much should E invest? -
E contributes $50,000 in cash to the business to receive a 10 percent interest in the partnership. Goodwill is to be recorded.
Profits and losses have previously been split according to the following percentages: A, 30 percent; B, 10 percent; C, 40 percent; and D, 20 percent. After E makes this investment, what are the individual capital balances? -
E contributes $52,000 in cash to the business to receive a 20 percent interest in the partnership. Goodwill is to be recorded. The four original partners share all profits and losses equally. After E makes this investment, what are the individual capital balances?
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E contributes $78,000 in cash to the business to receive a 25 percent interest in the partnership. No goodwill or other asset revaluation is to be recorded. Profits and losses have previously been split according to the following percentages: A, 10 percent; B, 30 percent; C, 20 percent; and D, 40 percent. After E makes this investment, what are the individual capital balances?
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C retires from the partnership and, as per the original partnership agreement, is to receive cash equal to 112 percent of her final capital balance. No goodwill or other asset revaluation is to be recognized. All partners share profits and losses equally. After the withdrawal, what are the individual capital balances of the remaining partners?
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