EXERCISE 1

Requirement 1      

       

Goodwill   200,000  

    Cesar, capital     120,000

    Damon, capital     80,000

       

Cesar, capital   210,000  

Damon, capital   190,000  

    Egan, capital     400,000

       

Requirement 2      

       

Goodwill   100,000  

Cash   500,000  

    Egan, capital     600,000

       
       

       

Requirement 3      

       

Goodwill   100,000  

    Cesar, capital     60,000

    Damon, capital     40,000

       

Cash   700,000  

    Egan, capital     700,000

 
If Egan invests $700,000 for a 50% interest, it implies that total partnership capital should be $1,400,000.
After Egan’s investment, total capital will be $1,300,000, and goodwill is therefore $100,000. The
goodwill is allocated to Cesar and Damon

EXERCISE 7
 Income     Sealy     Teske     Ubank  

Net $   88,000                    
income

Bonus   ( 13,200 ) $ 4,400   $ 4,400   $ 4,400  

Salary   ( 18,000 )   7,500     10,500        

Interest   ( 6,000 )               6,000  

Subtotal     50,800     11,900     14,900     10,400  

Balance   ( 50,800 )   17,780     12,700     20,320  

Totals $   0   $ 29,680   $ 27,600   $ 30,720  

                         
1. A
2. D
3. C
4. B
5. B
6. C
7. D
8. D
9. C
10. B
11. B
12. B
13. B
14. A
15. D
16. D
17. D
18. C
19. C
20. D

Goodwill 200,000
Cesar, capital 120,000
Damon, capital 80,000