Kravitz and Rowe are partners in an excavating business known as K & R Excavating. The partners are considering a number of options regarding the partnership, including the admission of a new partner and a potential sale of the partnership. The following information has been prepared as a basis for evaluating various alternatives:

The partners currently share profits and losses 60% and 40%, respectively, for Kravitz and Rowe.
Given the preceding information, respond to each of the following items:
Required
1. Given the stated fair values, if Rowe were to sell one-half of her interest in capital to someone outside the partnership, what would be a suggested asking price?
2. Given the stated fair values, if a third party were to convey assets to the partnership in exchange for a 40% interest in the partnership, what would the value of those assets have to be?
3. Assume a new partner was admitted to the partnership with a 40% interest in capital in exchange for a cash contribution of $60,000. What would Rowe€™s capital balance be as a result of this transaction, assuming use of the bonus method?
4. Given the facts of (3) above, what would Rowe€™s capital balance be, assuming use of the goodwill method?
5. Assume a new partner was admitted to the partnership with a 30% interest in capital in exchange for a contribution of $55,000 of net tangible assets. What would the new partner€™s capital balance be as a result of this transaction, assuming use of the bonus method?

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ltem Book Value Fair Value Tax Basis .$20,000 20,000 20,000 92,000 50,000 18,000 320,000 $523,000 $437,000 $500,000 .54,000 54,000 54,000 29,000 240,000 Cash and cash equivalents Accounts receivable Inventory Prepaid and other current assets 85,000 42,000 18,000 358,000 72,000 30,000 15,000 300,000 . . . . . . . . . . . . .. Total assets Accounts payable... Other current liabilities 29,000 240,000 120,000 80,000 35,000 240,000 Notes/loans payable Kravitz, capital Total liabilities and capital.