Lear is to become a partner in the WS partnership by paying $80,000 in cash to the business. At present, the capital balance for Hamlet is $70,000 and for MacBeth is $40,000. Hamlet and MacBeth share profits on a 7:3 basis. Lear is acquiring 40 percent of the new partnership. a. If the goodwill method is applied, what will the three capital balances be following the payment by Lear? b. If the bonus method is applied, what will the three capital balances be following the payment by Lear?
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.
Lear is to become a partner in the WS partnership by paying $80,000 in cash to the business. At present, the capital balance for Hamlet is $70,000 and for MacBeth is $40,000. Hamlet and MacBeth share profits on a 7:3 basis. Lear is acquiring 40 percent of the new partnership.
a. If the
b. If the bonus method is applied, what will the three capital balances be following the payment by Lear?
| Goodwill Method | Bonus Method | |
| Hamlet | ||
| MacBeth | ||
| Lear |
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