Petersen, one of your clients, has indicated that Jacobsen is interested in buying Petersens interest in the partnership. Relevant information:

Information regarding partners: . . . . . . .

Partner......................... Jacobsen Petersen Olsen

Partners capital balance . . . . . . . . . . . $150,000 $100,000 $50,000

Partners profit and loss percentage. . . 30% 50% 20%

Information regarding net asset values:

Accounttitle..................... NotePayable NetReceivables NetPatents NetEquipment

Bookvalue...................... $130,000 $90,000 $50,000 $300,000

Marketvalue .................... 145,000 84,000 30,000 350,000

Petersen has asked you a number of questions regarding selling his interest in the partner- ship. It is important to note that the partners vote on partnership matters in the same propor- tion as their profit and loss percentages.

Prepare a response to each of the following questions:

1. Given the above information, what is the suggested value of Petersens interest in the partnership?

2. Petersen believes that there is significant additional value traceable to the partnership that is not reflected in the above information. In particular, Petersen believes that the partnership has significant goodwill and feels that his interest in the partnership is worth $130,000. What amount of total entity goodwill is suggested by this value?

3. If Petersen were to sell half of his interest in the partnership to Jacobsen and half to Olsen, why might the value of the two halves not be the same?

4. If Petersen were to sell one-half of his interest to the partnership for $60,000, what would his new capital balance be after the sale? Assume that all previously recognized net assets are recorded at their market values but that only the goodwill traceable to Petersens partial sale of an interest is recognized.

5. What might be some advantages to Petersen and Jacobsen of the partnership acquiring Petersens interest rather than selling to an individual?