In the ABC partnership (to which Daniel seeks admittance),the capital balances of Albert,Bert,and Connell,who share income in the ratio of 5:3:2 are:

-Based on the preceding information,what amount of goodwill will be recorded if Daniel invests $450,000 for a one-third interest?
A)$0
B)$10,000
C)$50,000
D)$100,000

Question

In the ABC partnership (to which Daniel seeks admittance),the capital balances of Albert,Bert,and Connell,who share income in the ratio of 5:3:2 are:
 
-Based on the preceding information,what amount of goodwill will be recorded if Daniel invests $450,000 for a one-third interest?
A)$0 
B)$10,000 
C)$50,000 
D)$100,000

Quizplus · Accepted Answer

To calculate the goodwill, we need to first calculate the total value of the partnership before Daniel's investment.
The total capital balance in the partnership is:
5x + 3x + 2x = 10x
Where x is the common factor.
We know that 10x = $1,100,000 (sum of the capital balances)
Therefore, x = $110,000
The total value of the partnership before Daniel's investment is $1,100,000.
Now, we need to find the value of one-third interest:
One-third of the total value = (1/3) x $1,100,000 = $366,667
Therefore, Daniel's investment of $450,000 exceeds the value of one-third interest ($366,667). This means that he is paying more than his share of the partnership value. As a result, there will be no goodwill recorded. So, the correct answer is C)$50,000

In the ABC Partnership (To Which Daniel Seeks Admittance),the Capital