Brian and two other friends from college decide to form a CPA firm specializing in forensic accounting.
Question:
Brian: Cash ($12,000), office and computer equipment ($18,000), knowledge of potential client base. Jennifer: Cash ($15,000), research materials ($11,000), specialized forensic skills Eric: Payable to the firm ($10,000), extensive computer audit experience
Pro-forma capital balances under three formation scenarios appear below.
Required
a. In each scenario, identify the flow of bonuses or the amount and beneficiaries of goodwill recorded.
b. Discuss the relative advisability of the three scenarios, paying particular attention to their effects on the new firm's future profitability and leverage (or credit-worthiness).
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...
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Related Book For
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III
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