Problem

The capital accounts of the Fax and Bel partnership on September 30, 2011, were: Fax cap...

The capital accounts of the Fax and Bel partnership on September 30, 2011, were:

Fax capital (75% profit)

$140,000

Bel capital (25% profit)

60,000

Total capital

$200,000

On October 1, Rob was admitted to a 40 percent interest in the partnership when he purchased 40 percent of each existing partner’s capital for $120,000, paid directly to Fax and Bel.

REQUIRED

1. Determine the capital balances of Fax, Bel, and Rob after Rob’s admission to the partnership if goodwill

is not recorded.


2. Determine the capital balances of Fax, Bel, and Rob after Rob’s admission to the partnership if goodwill

is recorded, assuming that the book value and fair value of recorded assets are equal.

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Solutions For Problems in Chapter 16