In the RST partnership, Ron's capital is $80,000, Stella's is $75,000, and Tiffany's is $50,000. They share income in a 3:2:1 ratio, respectively. Tiffany is retiring from the partnership. Each of the following question is independent of the others.
Refer to the above information. Tiffany is paid $56,000, and all implied goodwill is recorded. What is the total amount of goodwill recorded?

Question

Quizplus · Accepted Answer

The total capital before Tiffany's retirement is $205,000 ($80,000 + $75,000 + $50,000). Tiffany is paid $56,000, which is $6,000 more than her capital account of $50,000. Since the partnership pays more than her capital account, the excess $6,000 represents her share of the goodwill. Given the 3:2:1 ratio, the total goodwill is $36,000 (6 times the $6,000 excess).

In the RST Partnership, Ron's Capital Is $80,000, Stella's Is