Dexter, Edwards, and French are partners with the following capital balance and profit and loss sharing percentages: Dexter $200,000 (70%) Edwards 120,000 (20%) French 60,000 (10%) It is agreed that Edwards will withdraw from the partnership and receive his capital balance plus his share of any increase in the fair value over book value of the underlying assets of the partnership. Assume the total increase in fair value is $100,000. a. if the bonus method is used what is the balance in Dexter’s capital account after the withdrawal of Edwards? b. if the goodwill method is used, what is the balance of the French’s capital account after the withdrawal of Edwards? Answer a and b both
Dexter, Edwards, and French are partners with the following capital balance and profit and loss sharing percentages: Dexter $200,000 (70%) Edwards 120,000 (20%) French 60,000 (10%) It is agreed that Edwards will withdraw from the partnership and receive his capital balance plus his share of any increase in the fair value over book value of the underlying assets of the partnership. Assume the total increase in fair value is $100,000. a. if the bonus method is used what is the balance in Dexter’s capital account after the withdrawal of Edwards? b. if the goodwill method is used, what is the balance of the French’s capital account after the withdrawal of Edwards? Answer a and b both
Dexter, Edwards, and French are partners with the following capital balance and profit and loss sharing percentages: Dexter $200,000 (70%) Edwards 120,000 (20%) French 60,000 (10%) It is agreed that Edwards will withdraw from the partnership and receive his capital balance plus his share of any increase in the fair value over book value of the underlying assets of the partnership. Assume the total increase in fair value is $100,000. a. if the bonus method is used what is the balance in Dexter’s capital account after the withdrawal of Edwards? b. if the goodwill method is used, what is the balance of the French’s capital account after the withdrawal of Edwards? Answer a and b both
Dexter, Edwards, and French are partners with the following capital balance and profit and loss sharing percentages: Dexter $200,000 (70%) Edwards 120,000 (20%) French 60,000 (10%) It is agreed that Edwards will withdraw from the partnership and receive his capital balance plus his share of any increase in the fair value over book value of the underlying assets of the partnership. Assume the total increase in fair value is $100,000.
a. if the bonus method is used what is the balance in Dexter’s capital account after the withdrawal of Edwards?
b. if the goodwill method is used, what is the balance of the French’s capital account after the withdrawal of Edwards?
Answer a and b both
Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.
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