The capital accounts of the Fax and Bel partnership on September 30, 2011, were: Fax capital (75% profit percentage) $140,000 Bel capital (25% profit percentage) 60,000 Total capital $200,000 On October 1, Rob was admitted to a 40 percent interest in the partnership when he purchased 40 percent of each existing partner’s capital for $120,000, paid directly to Fax and Bel. REQUIRED 1. Determine the capital balances of Fax, Bel, and Rob after Rob’s admission to the partnership if goodwillis not recorded. 2. Determine the capital balances of Fax, Bel, and Rob after Rob’s admission to the partnership if goodwillis recorded, assuming that the book value and fair value of recorded assets are equal. E 16-7Recording new partner investmentThe capital accounts of the Fax and Bel partnership on September 30, 2011, were:Fax capital (75% profit percentage)Bel capital (25% profit percentage)Total capital$140,00060,000$200,000On October 1, Rob was admitted to a 40 percent interest in the partnership when he purchased 40 percent of eachexisting partner's capital for $120,000, paid directly to Fax and Bel.REQUIRED1. Determine the capital balances of Fax, Bel, and Rob after Rob's admission to the partnership if goodwillis not recorded.2. Determine the capital balances of Fax, Bel, and Rob after Rob's admission to the partnership if goodwillis recorded, assuming that the book value and fair value of recorded assets are equal.

A partnership is a contract between at least two people to run a business and share profits and…

Answered: The capital accounts of the Fax and Bel…

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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The capital accounts of the Fax and Bel partnership on September 30, 2011, were:
Fax capital (75% profit percentage)
$140,000
Bel capital (25% profit percentage)
60,000
Total capital
$200,000
On October 1, Rob was admitted to a 40 percent interest in the partnership when he purchased 40 percent of each
existing partner’s capital for $120,000, paid directly to Fax and Bel.
REQUIRED
1. Determine the capital balances of Fax, Bel, and Rob after Rob’s admission to the partnership if goodwill
is not recorded.
2. Determine the capital balances of Fax, Bel, and Rob after Rob’s admission to the partnership if goodwill
is recorded, assuming that the book value and fair value of recorded assets are equal.

E 16-7
Recording new partner investment
The capital accounts of the Fax and Bel partnership on September 30, 2011, were:
Fax capital (75% profit percentage)
Bel capital (25% profit percentage)
Total capital
$140,000
60,000
$200,000
On October 1, Rob was admitted to a 40 percent interest in the partnership when he purchased 40 percent of each
existing partner's capital for $120,000, paid directly to Fax and Bel.
REQUIRED
1. Determine the capital balances of Fax, Bel, and Rob after Rob's admission to the partnership if goodwill
is not recorded.
2. Determine the capital balances of Fax, Bel, and Rob after Rob's admission to the partnership if goodwill
is recorded, assuming that the book value and fair value of recorded assets are equal.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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