After operating as partners for several years, Gro and Ham decided to sell one-half of each of their partnership interests to Iot for a total of $70,000, paid directly to Gro and Ham.
At the time of Iot’s admittance to the partnership, Gro and Ham had capital balances of $45,000 and $65,000, respectively, and shared profits 45 percent to Gro and 55 percent to Ham.
REQUIRED
1. Calculate the capital balances of each of the partners immediately after Iot is admitted as a partner assuming that the assets are not revalued, and prepare a second calculation of the capital balances assuming that the assets are revalued at the time Iot is admitted.
2. In designing a new partnership agreement, how should profits and losses be divided?
3. If a new partnership agreement is not established, how will profits and losses be divided?