When an incoming partner's contribution is different from that indicated by the book values of the original partnership, the admission of the partner, which method may be used to record the admission:

Question

Quizplus · Accepted Answer

The Goodwill method would be the best choice in this situation as it recognizes the difference between the book value of the partnership and the actual value of the incoming partner's contribution. Goodwill is calculated as the excess of the total value of the partnership above its book value, and this excess amount is allocated among the partners according to their profit and loss sharing ratio. This method ensures that the incoming partner is credited for the additional value they bring to the partnership, and the existing partners’ capital accounts are adjusted accordingly.

When an Incoming Partner's Contribution Is Different from That Indicated