A partnership has the following capital balances: Arlo (40% of gains and losses) $ 62,000 Band...
|
A partnership has the following capital balances: |
| Arlo (40% of gains and losses) | $ | 62,000 |
| Band (25%) | 70,000 | |
| Carlyle (35%) | 144,000 | |
|
David is going to invest $54,000 into the business to acquire a 30 percent ownership interest. Goodwill is to be recorded. What will be David’s beginning capital balance? |
a. $54,000.
b. $99,000.
c. $82,800.
d. $118,286.
Homework Answers
| Total Capital before investment | 276000 | =62000+70000+144000 |
| David's investment = 30% (Original capital plus David's investment) | ||
| 54000+Goodwill = 0.30*(276000+54000+Goodwill) | ||
| 54000+Goodwill = 99000+0.30 Goodwill | ||
| 0.70 Goodwill = 99000-54000 | ||
| 0.70 Goodwill = 45000 | ||
| Goodwill = 45000/0.70 = 64286 | ||
| David’s beginning capital balance = 54000+64286= $118,286 | ||
| Option D $118,286 is correct | ||
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