John and Mathew are in partnership
sharing profits and losses equally. A new partner Peter is admitted to the
partnership. Profits will shared John 40%, Mathew 40% and Peter 20%.
Goodwill is valued at $45,000. The capital balances before Peter was admitted to
the partnership were John $33,000 and Mathew $33,000. Peter pays $27,750 cash capital
contribution to the partnership. The partners agreed to write-off goodwill. The
capital balances after accounting for the change in partnership are John = $37,500
Mathew = $37,500 and Peter = $18,750.
The differences in capital balances of the partners before and after accounting
for change in partnership are due to:

Question

John and Mathew are in partnership
sharing profits and losses equally. A new partner Peter is admitted to the
partnership. Profits will shared John 40%, Mathew 40% and Peter 20%.
Goodwill is valued at $45,000. The capital balances before Peter was admitted to
the partnership were John $33,000 and Mathew $33,000. Peter pays $27,750 cash capital
contribution to the partnership. The partners agreed to write-off goodwill. The
capital balances after accounting for the change in partnership are John = $37,500
Mathew = $37,500  and Peter = $18,750.
The differences in capital balances of the partners before and after accounting
for change in partnership are due to:

Answer

Peter paying cash to John and Mathew for his share of goodwill

Answer

Creating goodwill and crediting the capital accounts in proportion to the old profit sharing ratio and writing-off goodwill and debiting the capital account in proportion to the new profit sharing ratio

100%

Answer

Creating goodwill and credting the capital accounts in proportion to the new profit sharing ratio and writing-off goodwill and debiting the capital accounts in proportion to the old profit sharing ratio

0%

Answer

Change in profit sharing ratios and capital contribution by Peter

Crowdly

John and Mathew are in partnership sharing profits and losses equally. A new pa...

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