Callie Is Admitted to the Adams & Beal Partnership Under

question 30

Multiple Choice

Callie is admitted to the Adams & Beal Partnership under the goodwill method. Callie contributes cash of $20,000 and non-cash assets with a market value of $30,000 and book value of $15,000 in exchange for a 20% ownership interest in the new partnership. Prior to the admission of Callie, the capital of the existing partnership was $130,000 and an appraisal showed the partnership net assets were fairly stated. Adams & Beal shared profits and losses at a ratio of 80/20, respectively.
Which of the following goodwill amounts would be recorded?

• A)$25,000 to Callie capital
• B)$70,000 to Callie capital
• C)$14,000 decrease to Beal capital
• D)$56,000 increase to Adams capital

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Definitions:

Parapsychology

The study of paranormal phenomena, including ESP and psychokinesis.

Psychokinesis

The claimed ability to move or manipulate objects with the mind without physical interaction.

ESP

Extrasensory perception, the ability to gain information about an object, person, location, or physical event through means other than the known human senses.

Phantom Limb

A phenomenon in which individuals experience sensations, including pain, in a limb that has been amputated.