Recording new partner investment and partner retirements—Various situations
Bill and Ken enter into a partnership agreement in which Bill is to have a 60% interest in capital and profits and Ken is to have a 40% interest in capital and profits. Bill contributes the following:
|
Cost |
Fair Value |
|
|
Land |
$ 10,000 |
$20,000 |
|
Building |
100,000 |
60,000 |
|
Equipment |
20,000 |
15,000 |
There is a $30,000 mortgage on the building that the partnership agrees to assume. Ken contributes $50,000 cash to the partnership. Bill and Ken agree that Ken’s capital account should equal Ken’s $50,000 cash contribution and that goodwill should be recorded. Goodwill should be recorded in the amount of:
a $10,000
b $15,000
c $16,667
d $20,000