After successfully operating a partnership for several years, the partners have proposed to incorporate the business and admit another investor. The original partners will purchase at par an amount of preferred stock equal to the book values of their capital interests in the partnership and common stock for the amount of the market value, including unrecognized goodwill, of the business that exceeds their book value. The new investor will make an investment, at a 5 percent premium over par value, in both preferred and common stock equal to one-third of the total number of shares purchased by the original partners. The corporation will acquire all the partnership's assets, assume the liabilities, and employ the original partners and the new investor.

\section*{Required}

a. Discuss the differences in accounts used and in valuations that would be expected in comparing the balance sheets of the proposed corporation and that of the partnership.

\(b\). Discuss the differences that would be expected in a comparison of the income statements of the proposed corporation and that of the partnership.