Comparisons of Bonus, Goodwill, and Asset Revaluation Methods
Bill, George, and Anne are partners in the BGA Partnership. A difference of opinion exists among the partners as to how to account for Newt’s admission as a new partner. The three present partners have the following positions:
Bill wants to use the bonus method.
George believes the goodwill method is best.
Anne wants to revalue the existing tangible assets.
You have been called in to advise the three partners.
Required
Prepare a memo discussing the three different methods of accounting for the admission of a new partner, including consideration of the effects on partnership capital in the year Newt is admitted and on the capital balances in future years.
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