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Part 1- Partnership Dissolution I. Purchase a.

Bonus Method- in actuality there arent bonus recognized except the excess amount which is distributed to the old partners which is out of our concern since it is a personal transaction between the old and new partners. Illustration: A 120,000 40% B 60,000 20% C 120,000 40% *D purchased 100,000 for 20% interest Computation: A 120,000 x 20%= 24,000 B 60,000 x 20%= 12,000 C 120,000 x 20%= 24,000 Capital of New Partner 60,000 Entry: A Cap 24,000 B Cap 12,000 C Cap 24,000 D Cap 60,000 *40,000 is distributed according to the old partners Profit and Loss ratio. 40,000 x 40%= 16,000 for A 40,000 x 20%= 8,000 for B 40,000 x 40%= 16,000 for C

b. Goodwill New Partners Payment/Interest Purchased= Resulting Capital (Old Partners Capital) Goodwill Same Example. 100,000/.20= 500,000 (300,00)

Goodwill 200,000 Entry Goodwill 200,000 A Cap 80,000 B Cap 40,000 C Cap 80,000 New Capital Balances A 120,000 + 80,000 = 200,000 x 20%= 40,000 B 60,000 + 40,000 = 100,000 x 20%= 20,000 C 120,000 + 80,000 = 200,000 x 20% = 40,000 D Capital 100,000 Entry: A Cap 40,000 B Cap 20,000 C Cap 40,000 D Cap 100,000 * First determine the goodwill to be allocated then compute for the new capital balances and the New partners Capital balance.

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