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A and B have partner capital balances, at book value, of $50,000 and $70,000. A is allocated 60% of profits or losses, and B is allocated the balance. The partners believe that an asset (land) has a market value in excess of book value in the amount of $30,000. They are considering admitting C to the partnership in exchange for total consideration of $80,000 cash. C will receive 40% interest in capital and 35% interest in profits and losses. Under the goodwill method, how much of goodwill should be recognized? a. 0 b. 30,000 c. 50,000 d. 120,000

A and B have partner capital balances, at book value, of $50,000 and $70,000. A is allocated 60% of profits or losses, and B is allocated the balance. The partners believe that an asset (land) has a market value in excess of book value in the amount of $30,000. They are considering admitting C to the partnership in exchange for total consideration of $80,000 cash. C will receive 40% interest in capital and 35% interest in profits and losses. Under the goodwill method, how much of goodwill should be recognized? a. 0 b. 30,000 c. 50,000 d. 120,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A and B have partner capital balances, at book value, of $50,000 and $70,000. A is allocated 60% of profits or losses, and B is allocated the balance. The partners believe that an asset (land) has a market value in excess of book value in the amount of $30,000. They are considering admitting C to the partnership in exchange for total consideration of $80,000 cash. C will receive 40% interest in capital and 35% interest in profits and losses. Under the goodwill method, how much of goodwill should be recognized?

a. 0
b. 30,000
c. 50,000
d. 120,000
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