Assume the partnership of Dean, Hardin, and Roth has been in existence for a number of years. Dean decides to withdraw from the partnership when the partners' capital balances are as follows:
An appraisal of the business and its property estimates the fair value to be $100,000. Dean has agreed to receive $64,000 in exchange for his partnership interest.
What are the remaining partners' capital balances after Dean's interest is dissolved, assuming the bonus method is applied?
Definitions:
Utility Maximization
The process by which individuals allocate their resources to obtain the highest possible level of satisfaction or utility, subject to their budget constraint.
Marginal Utility
The change in total utility obtained by consuming one additional unit of a good or service.
Consumption Bundle
A set of goods or services that a consumer chooses to purchase at a given time.
Good 1
Typically a term used in economics to represent a specific commodity or product in theoretical discussions.
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