The capital balances of the DEF Partnership are as
follows:
Danielson
$180,000
Eklund
95,000
Forsberg
150,000
Total
$425,000
The partners' income sharing ratio is: Danielson, 25%; Eklund, 45%;
Forsberg, 30%. Assume the partnership’s identifiable net assets are
carried at amounts approximating fair value.
Case A:
Assume Gustafson joins the partnership by contributing $125,000 to
the partnership for a 20% interest in partnership capital.
Case B:
Now assume Gustafson paid $90,000 for a 20% interest in partnership
capital.
Instruction: For each case (each case is independent), please use
both Bonus method and Goodwill method to analyze the problem.
Prepare the Statement of Partners’ Capital Balances, as well as the
related journals prepared for the partnership.
Bonus Method | |||||
Case A | |||||
Total capital of DEF | 425000 | ||||
(180000+95000+150000) | |||||
Investment of Gustafson | 125000 | ||||
Interest of Gustafson | 20% | ||||
Total capital of new partnership | 550000 | ||||
(425000+125000) | |||||
Value of Gustafson's Capital | 110000 | ||||
(550000*20/100) | |||||
Calculation of Bonus | |||||
Gustafson's investment - Gustafson's capital value | 15000 | ||||
(125000-110000) | |||||
In this case as bonus is positive it should be devided among the old partners | |||||
in their profit sharing ratio. | |||||
Danielson = | 15000*25/100 | 3750 | |||
Eklund = | 15000*45/100 | 6750 | |||
Forsberg = | 15000*30/100 | 4500 | |||
Journal | |||||
Description | Debit | Credit | |||
Cash A/c Dr | 125000 | ||||
To Gustafson's Capital | 110000 | ||||
To Danielson's Capital | 3750 | ||||
To Eklund's Capital | 6750 | ||||
To Forsberg's Capital | 4500 | ||||
Statement of partners new capital | |||||
Danielson - | 180000+3750 >> | 183750 | |||
Eklund - | 95000+6750 >> | 101750 | |||
Forsberg - | 150000+4500 >> | 154500 | |||
Gustafson - | 110000 |
Bonus Method | |||||
Case B | |||||
Total capital of DEF | 425000 | ||||
(180000+95000+150000) | |||||
Investment of Gustafson | 90000 | ||||
Interest of Gustafson | 20% | ||||
Total capital of new partnership | 515000 | ||||
(425000+90000) | |||||
Value of Gail's Capital | 103000 | ||||
(515000*20/100) | |||||
Calculation of Bonus | |||||
Gustafson's investment - Gustafson's capital value | -13000 | ||||
(90000-103000) | |||||
In this case as bonus is negative it should be adjusted to Gail's investment. | |||||
So Gustafson's new capital would be = 90000-13000 | |||||
= 77000 | |||||
Journal | |||||
Description | Debit | Credit | |||
Cash A/c Dr | 90000 | ||||
To Gustafson's Capital | 77000 | ||||
To Gustafson's Bonus | 13000 | ||||
Statement of partners new capital | |||||
Danielson - | 180000 | ||||
Eklund - | 95000 | ||||
Foresberg - | 150000 | ||||
Gustafson - | 77000 |
Goodwill method | |||||
Case A | |||||
Total capital of DEF | 425000 | ||||
(180000+95000+150000) | |||||
Investment of Gustafson | 125000 | ||||
Interest of Gustafson | 20% | ||||
Total capital of new partnership | 550000 | ||||
(425000+125000) | |||||
Value of Gustafson's Capital | 110000 | ||||
(550000*20/100) | |||||
Calculation of Goodwill | |||||
Gustafson's investment - Gustafson's capital value | 15000 | ||||
(125000-110000) | |||||
Journal | |||||
Description | Debit | Credit | |||
Cash A/c Dr | 125000 | ||||
To Gustafson's Capital | 110000 | ||||
To Goodwill | 15000 | ||||
Statement of partners new capital | |||||
Danielson - | 183750 | ||||
Eklund - | 101750 | ||||
Forsberg - | 154500 | ||||
Gustafson - | 110000 |
Goodwill method | |||||
Case B | |||||
Total capital of DEF | 425000 | ||||
(180000+95000+150000) | |||||
Investment of Gustafson | 90000 | ||||
Interest of Gustafson | 20% | ||||
Total capital of new partnership | 515000 | ||||
(425000+90000) | |||||
Value of Gustafson's Capital | 103000 | ||||
(515000*20/100) | |||||
Calculation of Goodwill | |||||
Gustafson's investment - Gustafson's capital value | 13000 | ||||
(103000-90000) | |||||
Journal | |||||
Description | Debit | Credit | |||
Cash A/c Dr | 90000 | ||||
Goodwill A/c Dr | 13000 | ||||
To Gustafson's Capital | 103000 | ||||
Statement of partners new capital | |||||
Danielson - | 180000 | ||||
Eklund - | 95000 | ||||
Forsberg - | 150000 | ||||
Gustafson - | 103000 |
The capital balances of the DEF Partnership are as follows: Danielson $180,000 Eklund 95,000 Forsberg 150,000...
The capital balances of the DEF Partnership are as follows: Danielson $180,000; Eklund 95,000; Forsberg 150,000 Total $425,000 The partners' income sharing ratio is: Danielson, 25%; Eklund, 45%; Forsberg, 30%. Assume the partnership’s identifiable net assets are carried at amounts approximating fair value. Case A: Assume Gustafson joins the partnership by contributing $125,000 to the partnership for a 20% interest in partnership capital. Case B: Now assume Gustafson paid $90,000 for a 20% interest in partnership capital. Instruction: For each...
The capital balances of the DEF Partnership are as follows: Danielson $180,000; Eklund 95,000; Forsberg 150,000 Total $425,000 The partners' income sharing ratio is: Danielson, 25%; Eklund, 45%; Forsberg, 30%. Assume the partnership’s identifiable net assets are carried at amounts approximating fair value. Case A: Assume Gustafson joins the partnership by contributing $125,000 to the partnership for a 20% interest in partnership capital. Case B: Now assume Gustafson paid $90,000 for a 20% interest in partnership capital. Instruction: For each...
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