At year-end, the Cisco partnership has the following capital balances: Montana, Capital . . . . .

Question:

At year-end, the Cisco partnership has the following capital balances:

Montana, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . $130,000

Rice, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000

Craig, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000

Taylor, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000

Profits and losses are split on a 3:3:2:2 basis, respectively. Craig decides to leave the partnership and is paid $90,000 from the business based on the original contractual agreement. If the goodwill method is to be applied, what is the balance of Montana’s capital account after Craig withdraws?

a. $133,000.

b. $137,500.

c. $140,000.

d. $145,000.

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...