Answer:
Explanation:
By using the Bonus method for the initial investment:
The overall total capital contributed that can be identified as:
= $28,000 + $77,000
= $105,000
If the unidentifiable assets are not registered, each partner will begin with:
=[tex]\dfrac{ \$ 105,000}{2}[/tex]
= $52,500
Description Debit Credit
Cash 91,000
Receivables 28,000
Inventories 56,000
Accounts Payable 42,000
Accrued Liabilities 28,000
Capital for Partner A, 52,500
Capital for Partner B, 52,500
[The business began with a small initial investment]
Using the Goodwill method for the initial investment:
The value of A's unrecognizable assets is calculated using B's allocation (50 percent)
Total partnership capital [tex]=(\$77000 \times \dfrac{100}{50}) - ( 28000 + 77000)[/tex]
= $49,000
Thus, Goodwill = $49,000
Description Debit Credit
Cash 91,000
Receivables 28,000
Inventories 56,000
Goodwill 49,000
Accounts Payable 42,000
Accrued Liabilities 28,000
Capital for Partner A, 77,000
Capital for Partner A, 77,000
[The business began with a small initial investment]
