Partnership Dissolution: Withdrawal, Retirement, Death, Incapacity of a Partner
1. The partnership AA, BB, CC, and DD has been in operation for two years with the partners sharing
profits and losses in the ratio of 40%, 20%, 20%, 20%, respectively. During the past year it has become
apparent that CC and DD are nor compatible and CC has decided to withdraw from the partnership as of
the end of the year at the urging of AA and BB. CC wants 90,000 for his share of capital. The balances in
the capital accounts at the end of the year are:
AA 102,000
BB 60,000
CC 70,000
DD 48,000
Instructions:
1. The partnership will acquire CC's interest for 90,000, which will be paid in five annual installments of
18,000, plus interest of 10%. The partners feel that the price that CC will accept for the capital share is a
fair measure of the worth of the business.