Question
This question pertains to withdrawal of a partner and the corresponding goodwill. Michael Starr, a partner who worked in an accounting firm (he was a
This question pertains to withdrawal of a partner and the corresponding goodwill. Michael Starr, a partner who worked in an accounting firm (he was a fan of doing consolidations), decided to withdraw from the partnership. Starr's share of the partnership profits and losses was 20%. Upon withdrawing from the partnership (and promising to never work again), he was paid $74,000 in final settlement for his interest. The total of the partners' capital accounts before recognition of partnership goodwill prior to Starr's withdrawal was $210,000. After his withdrawal, the remaining partners' capital accounts, excluding their share of goodwill, totaled $160,000. The total agreed upon goodwill of the firm was:
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