Chapter 12, Problem 7QC

To determine

Acquisition of Interest in a Partnership:

Partnerships may permit transfer of interest between partners. When such a transfer takes place, capital account of the retiring partner or the partner forgoing the interest, is debited and the incoming partners’ capital account is credited.

Any difference between the balance of the retiring partners’ capital account balance and the amount paid to acquire such capital balance is debited to a separate account called Goodwill.

Goodwill is an asset and may be described as the enhanced compensation that may be demanded, if the market value of the business is more than the book value.

Correct journal entry to record acquisition of partnership interest.