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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?
A $34,600
B $17,800
C $30,400
D $26,200What 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.
A) 34600
Luka/Eden- will be same for both
22000
+42000/2
= 43000 – (2/5 *42000)
=43000- 16800
=26,200however greg’s share to pay is 1/5 *42000= 84000
The question is what value when $8400 is subtracted gives 26200?
x- 8400=26200
=26200+8400
x= 34600Malik and Vasha are in partnership. The partnership agreement provides for interest on capital to be paid at a rate of 11% per annum. You have the following information: Malik $ Vasha $ Capital balance at 1 November 2010 38,500 47,800 Capital introduced on 1 April 2011 6,000 3,000 What is the total value of interest on capital for the year to 31 October 2011? A $9,905.50 B $10,483.00 C $9,493.00 D $10,070.50
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