Luka and Eden have been in partnership, sharing profits and losses equally.
Greg was admitted to the partnership on 1 December 2012. At that date Luka and Eden each had
a credit balance of $22,000 on their capital accounts. It was agreed that:
(1) Goodwill, which would not be carried in the books of the new partnership, had a value of $42,000.
(2) Profits and losses in the new partnership would be shared between Luka, Eden and Greg in the ratio 2:2:1.
(3) Greg would introduce cash so that, immediately following his admission, the capital account balances of all three partners were equal.
How much cash was Greg required to introduce?
What are your thoughts on the problem?
For the goodwill adjustment: Cr Old partners with their share of goodwill in the old profit sharing ratio then DR all partners, including the new one, with their share of goodwill in the new PSR.
Luka/Eden- will be same for both
= 43000 – (2/5 *42000)
however greg’s share to pay is 1/5 *42000= 84000
The question is what value when $8400 is subtracted gives 26200?
Looks spot on to me!
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