16. Lear is to become a partner in the WS partnership by paying $80,000 in cash to...

Question:

16. Lear is to become a partner in the WS partnership by paying $80,000 in cash to the business. At present, the capital balance for Hamlet is $70,000 and for MacBeth is $40,000. Hamlet and MacBeth share profits on a 7:3 basis. Lear is acquiring 40 percent of the new partnership.

a. If the goodwill method is applied, what will the three capital balances be following the payment by Lear?

b. If the bonus method is applied, what will the three capital balances be following the payment by Lear?

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... Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...