Admission of new partner-Goodwill Method Assume that Partners A and B each report a Capital Account of $225,000. Partner C wants to join the partnership as an equal one-third partner. Because the partnership has been very profitable, Partners A and B require Partner C to contribute $450,000 in cash to the partnership in return for a one-third interest. Assume that Partners A and B share profits 60% and 40%, respectively, prior to the admission of Partner C. Assume that the partners believe that the payment by Partner C provides evidence of a previously unrecorded intangible asset in the partnership and the partners wish to record the intangible on the post- realignment partnership balance sheet. After admission of Partner C, Partners A and B retain their relative proportion of profit allocation after granting Partner C a 30% profit-allocation interest. Use the Goodwill Method to record the journal entry on the books of the partnership to reflect the admission of Partner C.

Admission of new partner-Goodwill Method Assume that Partners A and B each report a Capital Account of $225,000. Partner C wants to join the partnership as an equal one-third partner, Because the partnership has been very profitable, Partners A and B require Partner C to contribute $450,000 in cash to the partnership in return for a one-third interest. Assume that Partners A and B share profits 60% and 40%, respectively, prior to the admission of Partner C Assume that the partners believe that the payment by Partner C provides evidence of a previously unrecorded intangible asset in the partnership and the partners wish to record the intangible on the post realignment partnership balance sheet. After admission of Partner C, Partners A and B retain their relative proportion of profit allocation after granting Partner C a 30% profit-allocation interest. Use the Goodwill Method to record the journal entry on the books of the partnership to reflect the admission of Partner C Cash Description Capital Account Partner A Capital Account, Partner B Check Debit Credit