Assume that the capital of an existing partnership is $90,000 and all existing assets reflect fair market values. If an incoming partner acquires a 40% interest in the partnership for $55,000, the goodwill traceable to the incoming partner is

Question

Quizplus · Accepted Answer

Implied fair value of partnership 90,000 / 60% = 150,000
Partner's interest in partnership 150,000 x 40% = 60,000
Goodwill = partner's interest - investments = 60,000 - 55,000 = 5,000

Assume That the Capital of an Existing Partnership Is $90,000