Based on the following information relating to the BIG partnership answer the question #s 1 - 4:

Bill 20% Income share ratio $ 70,000 Capital balance

Inga 20% 90,000

George 60% 160,000

Betty joins the partnership which is renamed BIGB.

1) Betty purchases an interest in the partnership by paying George $85,000 for half of his partnership interest. The partnership net assets are fairly valued; therefore no revaluation is done. What are the balances in the four partners' accounts after Betty is admitted?

HINT: Betty pays the $85,000 to George, not the partnership. George owns 50% of the partnership ($160,000 of $320,000). Therefore, if Betty buys half of George's interest she should end up with 25% of the partnership.

Bill = $70,000, Inga = $90,000, George = $80,000, Betty = $80,000. Bill = $70,000, Inga = $90,000, George = $160,000, Betty = $85,000. Bill = $70,000, Inga = $90,000, George = $80,000, Betty = $85,000. Bill = $70,000, Inga = $90,000, George = $160,000, Betty = $80,000.

2)

Betty purchases an interest in the partnership by paying George $85,000 for half of his partnership interest. The partnership net assets are under valued; therefore goodwill is to be recorded. What is the amount of goodwill and the balances in the partners' capital accounts after Betty is admitted? HINT: Based on Betty's payment of $85,000 for 25% of the partnership, if 25% of the partnership is valued at $85,000 then we can assume the market value of the entire partnership is $340,000 (85,000 x 4). Any goodwill recorded should be allocated to the old partners only.

		Goodwill = $(85,000) Capital = Bill $70,000, Inga $90,000, George $80,000, Betty $80,000.
		Goodwill = $0 Capital = Bill $70,000, Inga $90,000, George $80,000, Betty $80,000.
		Goodwill = $20,000 Capital = Bill $74,000, Inga $94,000, George $86,000, Betty $86,000.
		Goodwill = $5,000 Capital = Bill $70,000, Inga $90,000, George $80,000, Betty $85,000.

3)

Betty purchases a 20% interest in the partnership by investing $100,000 in the partnership. Goodwill is not recorded. What are the balances in the partners' capital accounts after Betty is admitted into the partnership?

Betty purchases a 20% interest in the partnership by investing $100,000 in the partnership. Goodwill is not recorded. What are the balances in the partners' capital accounts after Betty is admitted into the partnership?

Bill = $70,000, Inga = $90,000, George = $160,000, Betty = $80,000.

Bill = $70,000, Inga = $90,000, George = $160,000, Betty = $84,000.

Bill = $73,200, Inga = $93,200, George = $169,600, Betty = $84,000.

Bill = $70,000, Inga = $90,000, George = $160,000, Betty = $100,000.

4)

Betty purchases a 20% interest in the partnership by investing $100,000 in the partnership. Goodwill is recorded. What is the amount of goodwill and the balances in the partners' capital accounts after Betty is admitted?

		Bill = $86,000, Inga = $106,000, George = $208,000, Betty = $120,000. Goodwill = $100,000
		Bill = $90,000, Inga = $126,000, George = $220,000, Betty = $100,000. Goodwill = $100,000
		Bill = $70,000, Inga = $90,000, George = $160,000, Betty = $180,000. Goodwill = $80,000
		Bill = $86,000, Inga = $106,000, George = $208,000, Betty = $100,000. Goodwill = $80,000