Posted: 19 May 2011 at 11:22 | IP Logged
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Here is a online test question I worked on today:
Cor-Eng partnership was formed on January 2, 2004. Under the partnership agreement, each partner has an equal initial capital balance accounted for under the goodwill method. Partnership net income or loss is allocated 60% to Cor and 40% to Eng. To form the partnership, Cor originally contributed assets costing $30,000 with a fair value of 60,000 on January 2, 2004, While Eng contributed $20,000 in cash. Drawing by the partners during the 2004 totaled $3000 by Cor and $9000 by Eng. Cor-Eng net income for 2004 was $25,000. Eng¡¯s initial capital account in Cor-Eng was?
A. 60,000 B. 40,000 C, 20,000 D. 25,000
I chosen C, but the answer is A. Can anyone explain?
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