Question

question is PA12-9

un Distribution of rein bution of remaining cash to partners assuming Shasta pays the deficiency. bution of remaining cash to partners assuming Shasta does not pay the deficiency. 11124 Calculating pa LOS Gren, Bare, and Rett are part lculating Partner Return on Equity (ROE) Kett are partners in the GBR partnership. Information related to the partners follow Bare Rett Total Gren Balance 1/1/2008 Contributions $71,000 20,000 33,000 (30,000) $94,000 $30,000 5,000 11,000 (20,000) $26,000 $20,000 10,000 11,000 (2.000) $39,000 Net Income Drawings $21,000 5,000 11,000 (8,000) $29,000 Balance 12/31/2008 required: Calculate the Calculate the Which parts ulate the partnership ROE. te the ROE for each partner. ch partner has the best ROE?

Answer 1

The formula to calculate ROE is net income ÷ capital employed,

1. Partnership ROE = 33,000/94,000 = 0.35.
2. ROE of each partner,
   1. Gren = 11,000 ÷ 39,000 = 0.28.
   2. Bare = 11,000 ÷ 26,000 = 0.42.
   3. Rett = 11,000 ÷ 29,000 = 0.38.
3. Partner Bare has the best ROE.