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Following is the condensed balance sheet of Martinez, O'Neill and Clemens, partners who share profits or...

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Question

Accounting

Following is the condensed balance sheet of Martinez, O'Neilland Clemens, partners who share profits or losses in the ratio of 2: 3 : 5.

Cash$50,000Liabilities$200,000
Other assets1,050,000Capital - Martinez100,000
Capital - O'Neill300,000
Capital - Clemens500,000
Total assets$1,100,000Total liabilities and capital

$1,100,000

Required

(a) Assume that the partnership’s assets and liabilities arefairly valued as shown. The partners wish to admit Jeter as apartner with a 40 percent interest in capital, profits, and losses.They require Jeter to invest an amount such that bonus or goodwilladjustments are not needed. How much should Jeter invest for the 40percent share?
$Answer

(b) Assume instead that the existing partners, all of whomcontemplate retirement relatively soon, decide to sell Jeter 40percent of their respective partnership interests for a totalpayment of $480,000. This payment will be made proportionately toMartinez, O’Neill, and Clemens. The partners agree that impliedgoodwill is to be recorded prior to the transaction with Jeter.What are the capital balances of the four partners after thetransaction with Jeter?

Balances After
AcquisitionMartinez$Answer

O'NeillAnswer

ClemensAnswer

JeterAnswer

Total$Answer

Answer & Explanation Solved by verified expert
3.9 Ratings (729 Votes)
1 Computation of Amount jeter has to bring into the partnershipfirmit is mentioned that the goodwll adjustments are not need andnew    See Answer
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