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A partnership has the following capital balances: Germanese, Capital $640,000 Arent, Capital $250,000 Vertus, Capital $115,000 Profits and losses are currently split 10:7:3 Ryan
A partnership has the following capital balances: Germanese, Capital $640,000 Arent, Capital $250,000 Vertus, Capital $115,000 Profits and losses are currently split 10:7:3 Ryan invests $300,000 to buy a 25% ownership interest. The payment goes to the original partners. Goodwill is to be recognized. a) How much goodwill will be recognized? Is the goodwill going to be allocated to the original partners or Ryan only? b) Calculate the new capital balances for all partners after Ryan joins the partnership. c) Assume that instead, Ryan's capital contribution did not go directly to the partners but went into the business instead. The goodwill method is used. What would be the new capital balances for all partners? d) Assume that instead, Ryan's capital contribution did not go directly to the partners but went into the business instead. The bonus method is used. What would be the new capital balances for all partners?
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