Question

A partnership has the following capital balances:

Henry (60% of gains and losses)	$	52,000
Thomas (20%)		60,000
Catherine (20%)		124,000

Anne is going to invest $80,000 into the business to acquire a 30 percent ownership interest. Goodwill is to be recorded. What will be Anne’s beginning capital balance?

Multiple Choice

• $70,800

• $94,800

• $80,000

• $101,143

Answer 1

answer: $101,143

Calculation:

80,000 + goodwill = 0.3(236,000 + 80,000 + goodwill)

80,000 + goodwill = 94,800 + 0.3(goodwill)

goodwill - 0.3(goodwill) = 14,800

0.7(goodwill) = 14,800

goodwill = 21,143

capital balance = 21,143 + 80,000 = $101,143