he ABCD Partnership has the following balance sheet at January 1, 20X0, prior to
ID: 2502057 • Letter: H
Question
he ABCD Partnership has the following balance sheet at January 1, 20X0, prior to the admission of new partner, E. Cash and current assets $39,000 Liabilities $52,000 Land 234,000 A’s capital 26,000 Building and equipment 130,000 B’s capital 52,000 C’s capital 117,000 D’s capital 156,000 Total assets $403,000 Total liabilities and capital $403,000 E contributed $124,000 in cash to the business to receive a 20% interest in the partnership. Goodwill was to be recorded. The four original partners shared all profits and losses equally. Required: (A) Prepare the journal entries necessary to record goodwill. (B) After goodwill has been recorded, what were the individual capital balances of the original partners? (C) Prepare the journal entry necessary to record E's contribution.
Explanation / Answer
Net assets = 351000
Goodwill = 124000 - 351000x20% = 53800
(A). Journal entry to record the goodwill
Goodwill Ac/ Dr. 53800
Cash A/c Dr. 70200
To E's capital A/c 124000
(B). Partner's balance after goodwill
A B C D Capital before goodwill 26000 52000 117000 156000 Less: Goodwill 13450 13450 13450 13450 12550 38550 103550 142550Related Questions
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