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

There is a $30,000 mortgage on the building that the partnership agrees to assume. Ken contributes $50,000 cash to the partnership. Bill 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) $20,0002. Thomas and Mark are partners having capital balances of $50,000 and $60,000, respectively. They admit Jay to a one-third 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) Mark's capital will be $70,000(d) Goodwill will be recorded at $15,0003. On December 31, 2011, Tina and Webb, 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 Tina, Webb, 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 $200,0004. Finney and Rhoads have capital balances of $100,000 and $80,000, respectively, and they share profits equally. The partners agree to accept Chesterfield for a 25 percent interest in capital and profits for her investment of $90,000. If goodwill is recorded, the capital account balances of Finney and Rhoads immediately after Chesterfield's admittance to the partnership will be:(a) Finney, $100,000; Rhoads, $120,000(b) Finney, $111,250; Rhoads, $91,250(c) Finney, $145,000; Rhoads, $125,000(d) Finney, $120,000; Rhoads, $120,0005. The balance sheet of the Fred, Gini, and Peggy partnership on December 31, 2011, together with profit sharing ratios, revealed the following:

Gini 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 Gini is recorded on the partnership books, total partnership assets after Gini's withdrawal should be:(a) $566,667(b) $500,000(c) $430,000(d) $400,000

Transcribed Image Text:

Cost Fair Value $ 10,000 $20,000 Land Building Equipment 20,000 15,000