Profits and losses are split as follows: Allen (20%), Burns (30%), and Costello (50%). Costello wants to leave the partnership and is paid $100,000 from the business based on provisions in the articles of partnership. If the partnership uses the bonus method, what is the balance of Burns's capital account after Costello withdraws? A. $24,000. B. $36,000. C. $33,000. D. $27,000.

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Business

Bradley Daugherty

10 June, 23:17

Profits and losses are split as follows: Allen (20%), Burns (30%), and Costello (50%). Costello wants to leave the partnership and is paid $100,000 from the business based on provisions in the articles of partnership. If the partnership uses the bonus method, what is the balance of Burns's capital account after Costello withdraws? A. $24,000. B. $36,000. C. $33,000. D. $27,000.

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Answers (1)

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Maxim Bowen · Answer 1

A. $24,000

Explanation:

The missing information is shown below:

Allen capital $60,000

Burns capital $30,000

Costello capital $90,000

For computing the balance of Burns's capital account, first we have to determine the different amount which is shown below:

= Paid amount - Costello capital

= $100,000 - $90,000

= $10,000

This bonus amount would be deducted from the remaining partner's balances in the ratio of 3:2

For Burns, it would be

= $10,000 * 3 : 5

= $6,000

So, the burns capital amount would be

= $30,000 - $6,000

= $24,000