Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Management Posted 17 Jan 2018 My Price 8.00

Pearson and Murphy

Exercise 1 (LO 3, 4) Entry of a new partner under the goodwill method. Pearson and Murphy have partner capital balances, at book value, of $45,000 and $65,000 as of Decem- ber 31, 20X5. Pearson is allocated 60% of profits or losses, and Murphy is allocated the balance. The partners believe that tangible net assets have a market value in excess of book value in the amount of $30,000 net. The $30,000 is allocated as follows:

 

Book Value                                                          Market Value

Accounts receivable . . . . . . . . .

$120,000

$102,000

Inventory . . . . . . . . . . . . . . . . . .

200,000

258,000

Warranty obligations . . . . . . . .

20,000

30,000

 

They are considering admitting Warner to the partnership in exchange for total considera- tion of $84,000 cash. In exchange for the consideration, Warner will receive a 30% interest in capital and a 35% interest in profits.

1.    Prepare the entries associated with the admission of Warner to the partnership under the goodwill method.

2.    If the goodwill suggested by the admission of Warner proved to be worthless, determine by how much Warner would be harmed.

Answers

Maurice Tutor
(5)
Status NEW Posted 17 Jan 2018 10:01 PM My Price 8.00

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