Carson and Blake owned a successful insurance agency for many years. Currently their respective capital balances are
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Currently their respective capital balances are $200,000 and $160,000; they share profits and losses in the ratio of 6:4. Manning, a famous pro athlete who recently retired, has expressed an interest in joining the agency. Carson and Blake believe that Manning's involvement would substantially boost sales and profits. They offer Manning a 20 percent interest in both capital and profits and losses without any requirement of an investment by Manning.
Required
a. Compute the balances in the capital accounts of Carson, Blake, and Manning after Manning's admission, assuming that the parties agree to record the admission by the bonus method.
b. Compute the balances in the capital accounts of Carson, Blake, and Manning after Manning's admission, assuming that the parties agree to record the admission by the goodwill method. 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...
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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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