ACCT 559 Week_7_Homework.xlsx

ACCT 559 Week_7_Homework.xlsx - Chapter 14 Problem 27 Page...

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Chapter 14 Problem 27 Page 662 A) E investment(E.I.) = 25% (Original Capital + E investment) Original Capital = \$310,000 - \$40 E.I. = 25%(270,000 + E.I.) E.I. = \$67,500 + 0.25 E.I. 0.75 E.I. = \$67,500 E.I. = \$90,000 Answer: In order to receive 25% interest share, E needs to invest \$90,000. B) Implied Value = Contribution/Interest share = \$36,000/10% =\$360,000 Greater than capital value \$306,000 (=\$270,000+\$36,000). Goodwill = \$360,000 - \$306,000 =\$54,000 Allocate the Goodwill: Answer: Partners Goodwill Investment A 30% \$ 54,000 \$ 16,200 \$ 20,000 \$ - \$ 36,200 B 10% 54,000 5,400 40,000 - \$ 45,400 C 40% 54,000 21,600 90,000 - \$ 111,600 D 20% 54,000 10,800 120,000 - \$ 130,800 E - ### 36,000 \$ 36,000 C) Implied Value = Contribution/Interest share =\$42,000/20% =\$210,000 Less than capital value \$312,000 (=\$270,000+\$42,000) of th E is bringing an intangible asset to the partnership, so we sh E.I = 20%(Original Capital + E.I.) and E.I. = \$42,000 + goodwill Plug in E.I. to find goodwill \$42,000 + goodwill = 20%(\$270,000 + \$42,000 + goodwill) \$42,000 + goodwill = \$54,000 + \$8,400 + 0.20 goodwill \$42,000 + goodwill = \$62,400 + 0.20 goodwill 0.80 goodwill = \$62,400 - \$42,000 0.80 goodwill = \$20,400 Goodwill = \$20,400/0.80 Goodwill = \$25,500 Plug this back into E.I. E.I. = \$42,000 + \$25,500 = \$67,500 Percent Ownership Allocated Goodwill (= %Own x goodwill) Original Balance Capital Balance (=goodwill + Original bal + Investment)

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Answer: Since the partnerships share all profits and losses, they will still have their original capital balanc E's capital balance is \$67,500. D) Implied Value = Contribution/Interest share =\$55,000/20% =\$275,000 Calculate the bonus: Capital after E.I. \$ 325,000 =\$270,000 + \$55,000 E's Percent Ownership 20% E's capital balance \$ 65,000 E's payment \$ 55,000 Bonus given to E \$ 10,000
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