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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

FINANCIAL ACCOUNTING
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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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

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