Answered: At year-end, the Circle City…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

At year-end, the Circle City partnership has the following capital balances:

Manning, Capital	$350,000
Gonzalez, Capital	330,000
Clark, Capital	300,000
Freeney, Capital	290,000

Profits and losses are split on a 3:3:2:2 basis, respectively. Clark decides to leave the partnership and is paid $330,000 from the business based on the original contractual agreement.
The payment made to Clark beyond his capital account was for Clark's share of previously unrecognized goodwill. After recognizing partnership goodwill, what is Manning’s capital balance after Clark withdraws?

a. $359,000
b. $372,500
c. $380,000
d. $395,000

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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