Assume the partnership of Howell, Madrid, and Waldrop (A+ Guaranteed)

Assume the partnership of Howell, Madrid, and Waldrop has been in existence for a number of years. Howell decides to withdraw from the partnership when the partners’ capital balances are as follows:

Partner Capital Balance Profit Loss Ratio
Howell $60,000 4
Madrid $15,000 3
Waldrop $25,000 2

An appraisal of the business and its net assets estimates the fair value to be $154,000. Land with a book value of $20,000 has a fair value of $35,000. Howell has agreed to receive $84,000 in exchange for her partnership interest.

What are the remaining partners’ capital balances after Howell’s interest is dissolved, assuming the goodwill method is applied?

Here’s the SOLUTION

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