The following condensed balance sheet is presented for the partnership of Der, Egan, and Oprins, who share
Question:
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Assume that the partnership decides to admit Snider as a new partner with a 25 percent interest.
Required
For each of the following independent cases, determine the amount that Snider must contribute in cash or other assets.
a. No goodwill or bonus is to be recorded.
b. Goodwill of $30,000 is to be recorded and allocated to the original partners.
c. A bonus of $24,000 is to be paid by Snider and allocated to the original partners.
d. The original partners, Der, Egan, and Oprins, agree to give Snider $10,000 of goodwill upon admission to the partnership.
e. Other assets are revalued for an increase of $20,000, and goodwill of $40,000 is recognized and allocated to the original partners at the time of Snider's admission.
f. The partners agree that total resulting capital should be $820,000 and no goodwill should be recognized.
g. Other assets are revalued down by $20,000 and a bonus of $40,000 is paid to Snider at the time ofadmission.
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... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... 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 200000 No goodwill or bonus recorded Cash 200000 Snider Capital 800000 x 14 200000 075 estimated total resulting capital 600000 Estimated total resulting capital600000 075 800000 Prior capital 600000 Cash contribution required from Snider 200000 b 210000 Goodwill of 30000 to prior partners Goodwill 30000 Der Capital 30000 x 040 12000 Egan Capital 30000 x 030 9000 Oprins Capital 30000 x 030 9000 Cash 210000 Snider Capital 840000 x 14 210000 075 estimated total resulting capital 630000 Estimated total resulting capital630000 075 840000 Prior capital after goodwill recognition 630000 Cash contribution required from Snider 210000 c 232000 Bonus of 24000 to be paid by Snider Cash 232000 Der Capital 24000 x 040 9600 Egan Capital 24000 x 030 7200 Oprins Capital 24000 x 030 7200 Snider Capital 832000 x 14 208000 075 estimated total resulting capital 600000 24000 bonus 624000 Estimated total resulting capital624000 075 832000 Prior capital before bonus from Snider 600000 Cash contribution required from Snider 232000 d 190000 New partner given 10000 of goodwill Cash 190000 Goodwill 10000 Snider Capital 800000 x 14 200000 075 estimated total resulting capital 600000 Estimated total resulting capital600000 075 800000 Prior capital 600000 Capital credit to Snider 200000 Goodwill to Snider 10000 Cash contribution required from Snider 190000 e 220000 Other assets increased by 20000 and goodwill of 40000 allocated to prior partners Other Assets 20000 Goodwill 40000 Der Capital 60000 ...View the full answer
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
