Darrow invests $270,000 in cash for a 30 percent ownership interest. The money goes to the original

Question:

Darrow invests $270,000 in cash for a 30 percent ownership interest. The money goes to the original partners. Goodwill is to be recorded. How much goodwill should be recognized, and what is Darrow’s beginning capital balance?

a. $410,000 and $270,000.

b. $140,000 and $270,000.

c. $140,000 and $189,000.

d. $410,000 and $189,000.

Capital account balances:

William (40% of gains and losses) . . . . . . . . . . . . . $220,000

Jennings (40%) . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,000

Bryan (20%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...