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aimtobeacpa
Major Contributor

Joined: 10 Dec 2009
Online Status: Offline
Posts: 657

Posted: 02 Jul 2010 at 03:21 \| IP Logged

gleim software :equity:1188T-21
partnership of metcalf,peterson,russel,share profits and loss equally.when metcalf withdrew frm partnership, partners agreed tht partnership had unrecorded goodwill.Under the bonus method, capital bal of peterson and russell are
ans: each reduced by one-half of metcalf's share of total amt of unrecorded goodwill.

i didn't understand the explanation given.Can anyone explain

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1tryCPA
Major Contributor

Joined: 27 Jun 2010
Online Status: Offline
Posts: 337

Posted: 02 Jul 2010 at 06:30 \| IP Logged

When a partner withdraw from the partnership and there is a goodwill, first we should calculate GW.

For example, M had capital balance of 100,000. When he leaves, he is entitled to receive 120,000. If there is a goodwill, then, GW amount is 20,000/0.3333 ( M share) = 60,000.

Under GW method, the whole amount goes to D GW and C to capital of partners.

The problem says that they used bonus method.
The withdrawing partner's capital should be increased to 120,000 before withdrawing, so entry:

Capital P 10,000
Capital R 10,000
Capital M 20,000

P and R capital decreased by 10,000 that is 1/2 of 20,000 - M share of total GW ( 60,000 * 0.33333).

See if it helps.

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