A and B share profits and losses 60:40, and have capital accounts of $30,000 and $10,000,...
A and B share profits and losses 60:40, and have capital accounts of $30,000 and $10,000, respectively. Now C has agreed to invest $40,000 for a 40% interest in the new ABC partnership.
Using the Goodwill Method, what are the partner C’s Capital balance in the new ABC partnership and what is the total goodwill amount?
Homework Answers
| Net assets | A Capital | B Capital | C Capital | |
| Before admission | $40,000 | $30,000 | $10,000 | |
| Contribution | $40,000 | $40,000 | ||
| Sub total | $80,000 | $30,000 | $10,000 | $40,000 |
| Goodwill | $20,000 | $12,000 | $8,000 | |
| After admission | $100,000 ($40,000/40%) | $42,000 | $18,000 | $40,000 |
C’s Capital balance in the new ABC partnership = $40,000
Total goodwill amount = $20,000
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