Problem

1. Bil and Ken enter into a partnership agreement in which Bil is to have a 60 percent int...

1. Bil and Ken enter into a partnership agreement in which Bil is to have a 60 percent interest in capital and profits and Ken is to have a 40 percent interest in capital and profits. Bil contributes the following:

 

Cost

Fair Value

Land

$10,000

$20,000

Building

100,000

60,000

Equipment

20,000

15,000

There is a $30,000 mortgage on the building that the partnership agrees to assume. Ken contributes $50,000 cash to the partnership. Bil and Ken agree that Ken’s capital account should equal Ken’s $50,000 cash contribution and that goodwill should be recorded. Goodwill should be recorded in the amount of:

a $10,000

b $15,000

c $16,667

d $20,000


2. Tho and Mar are partners having capital balances of $50,000 and $60,000, respectively. They admit Jay to a onethird interest in partnership capital and profits for an investment of $65,000. If the goodwill procedure is used in recording Jay’s admission to the partnership:

a Jay’s capital will be $58,333

b Total capital will be $175,000

c Mar’s capital will be $70,000

d Goodwill will be recorded at $15,000


3. On December 31, 2011, Tin and Web, who share profits and losses equally, have capital balances of $170,000 and $200,000, respectively. They agree to admit Zen for a one-third interest in capital and profits for his investment of $200,000. Partnership net assets are not to be revalued. Capital accounts of Tin, Web, and Zen, respectively, immediately after Zen’s admission to the partnership are:

a $170,000, $200,000, and $200,000

b $165,000, $195,000, and $200,000

c $175,000, $205,000, and $190,000

d $185,000, $215,000, and $200,000


4. Fin and Rho have capital balances of $100,000 and $80,000, respectively, and they share profits equally. The partners agree to accept Che for a 25 percent interest in capital and profits for her investment of $90,000. If goodwill is recorded, the capital account balances of Fin and Rho immediately after Che’s admittance to the partnership will be:

a Fin, $100,000; Rho, $120,000

b Fin, $111,250; Rho, $91,250

c Fin, $145,000; Rho, $125,000

d Fin, $120,000; Rho, $120,000


5. The balance sheet of the Fre, Gin, and Peg partnership on December 31, 2011, together with profit-sharing ratios, revealed the following:

Cash

$240,000

Fre capital (30%)

$200,000

Other assets

360,000

Gin capital (30%)

170,000

 

 

Peg capital (40%)

230,000

 

$600,000

 

$600,000

Gin is retiring from the partnership, and the partners agreed that she should receive $200,000 cash as payment in full for her share of partnership assets. If the goodwill implied by the settlement with Gin is recorded on the partnership books, total partnership assets after Gin’s withdrawal should be:

a $566,667

b $500,000

c $430,000

d $400,000

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