Al and Bert are in partnership sharing profits equally. At 30 June they have balances on their
Question:
Al and Bert are in partnership sharing profits equally. At 30 June they have balances on their capital accounts of £12,000 (Al) and £15,000 (Bert). On that day they agree to bring in their friend Hall as a third partner. All three partners are to share profits equally from now on. Hall is to introduce £20,000 as capital into the business. Goodwill on 30 June is agreed at £18,000.
Required
a. Show the partners' capital accounts for 30 June and 1 July on the assumption that the goodwill, previously unrecorded, is to be included in the financial statements.
b. Show the additional entries necessary to eliminate goodwill again from the financial statements.
c. Explain briefly what goodwill is. Why are adjustments necessary when a new partner joins a partnership?
GoodwillGoodwill 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...
Step by Step Answer:
a b Capital Al Bert Hall Al Bert Hall Goodwill b 6000 6000 6000 Balance bd 12000 15000 Bank ...View the full answer
Introduction To Financial Accounting
ISBN: 978-0077138448
7th edition
Authors: Anne Marie Ward, Andrew Thomas
