Question

Partner Bonus Burns has a capital balance of $118,000 after adjusting assets to fair market value. Murray contributes $64,000 to receive a 35% in a new partnership with Burns Determine the amount and recipient of the partner bonus Amount of bonus Recipient of bonus

Answer 1

PARTNER BONUS

Old profit sharing ratio of Burns before admission = 100% =1

Total capital after admission = $118000+$64000 =$182000

New profit sharing ratio of burns = $118000 / $ 182000 = 0.65

New profit sharing ratio of Murray = $64000 / $ 182000 = 0.35

Sacrificing ratio of burns = Old ratio - new ratio = 1- 0.65 = 0.35

Amount of bonus = $118000 x 0.35 = $ 41300

Recipient of bonus = Burns

LIDQUATING PARTNERSHIPS

Amount realised on sale of assets = $48000

Amount of liabilites = $1000

Therefore, Net assets = $48000 -$1000 = $47000

Total capital = $16000 +$27000 = $43000

Excess of net assets over capital that is profit will be shared equally among partners = $47000-$43000= $4000

Amount of final distribution on liquation of partnership to MacPherson = share of capital +profits share of net assets

= $16000 + half of profits on net assets $4000 = $18000

LIQUIDATING PARTNERSHIPS -DEFICIENCY

Amount realised on sale of assets = $40000

Amount of liabilites = NIL

Therefore, Net assets = $40000 -NIL = $40000

Total capital = $21000 +$79000 = $100000

Excess of capital over net assets that loss / deficiency on liqudation = $ 100000-$40000= $60000

The loss is shared equally = $60000/2 = $30000

Amount of Pepper's deficiney = $21000 -$30000 =($ 9000)

Amount to be distributed to Morrison = $79000 -$30000 = $69000

Amount to be distributed to Morrison assuming Pepper is unable to satisfy the deficiney (Pepper's deficiency is adjusted) = $69000 - $9000 = $60000