In the AD partnership, Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following question is independent of the others.
Refer to the information provided above. David invests $50,000 for a one-fifth interest. What amount of goodwill will be recorded?

Question

Quizplus · Accepted Answer

Explanation:The total capital of the new partnership is $140,000 + $40,000 + $50,000 = $230,000. David's one-fifth interest is $230,000 x 1/5 = $46,000. The goodwill is the excess of David's investment over his capital interest, which is $50,000 - $46,000 = $4,000.

In the AD Partnership, Allen's Capital Is $140,000 and Daniel's