During your audit of the financial statements of Arnold, Bright & Carle LLP for the fiscal year ended January 31, 2005, you review the following general journal entry:

Instructions Is recognition of goodwill in the foregoing journal entry in accordance with generally accepted accounting principles? Explain.

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2004 Feb. 1 Cash Goodwill Arnold, Capital ($60,000 0.60) Bright, Capital ($60,000 x 0.40) Carle, Capital To record admission of Carla Carle to Arnold & Bright LLP for a one-third interest in total capital, with implicit goodwill allocated to Arnold and Bright in their income-sharing ratio. Goodwill is computed as follows: Implied total capital of partnership based on Carle's investment ($120,000 x 3) Less: Total capital of Arnold and Bright Cash invested by Carle Goodwill $360,000 (180,000) (120,000) $ 60,000 120,000 60,000 36,000 24,000 120,000