Forum

• # 98193
• Thu 13 Mar 2014 10:31 AM

Hi All

I am hoping someone can help!! I have already failed this exam once and re-sit on the 31st and I just cant get Goodwill it is my nemesis.

I have gone back through my course material and I am going through Unit 4 and am on the Assignment Part B.

The query I have is all through the tasks we have never entered the actual goodwill share into the partners capital accounts just the adjustments but for this answer we have to and I am confused why.....I know im missing something somewhere I just dont know what!!

This is the question:

Ashton, Stockton, Wapley & Mowley are in partnership sharing profits/losses in the ratio 5:3:2:2 respectively

Ashton decides to retire at the end of the business year.  The balance sheet provides the following information

Net Assets         310,000

Capital Acc       

Ashton              120,000

Stockton             80,000

Wapley               60,000

Mowley               50,000

                       310,000

A new partner Chandos is to join the business immediately introducing £30,000 as capital which includes goodwill.

The partners value goodwill at £96,000 but this is not to remain in the books.  In the new partnership profit & losses will be shared in the ratio

Stockton: 5   Wapley: 3   Mowley: 3   Chandos: 1

Ashton agrees to leave £80,000 of the amount due to him as a loan to the new partnership

Required:

a) The partners capital accounts showing the enteries necessary to record both the retirement and the admission

b) A balance sheet for the new partnership

Any help would be greatly received.

Thanks

Christina

• 
  Quote
  

• # 98200
• Thu 13 Mar 2014 02:16 PM

Goodwill was my nemesis too for a long time!!

Basically in this question, u are being asked to open up a Goodwill Account and debit it for £96,000 with the corresponding credit entry split in preportion between the 4 original partners.

Your question then tells u that Goodwill is not to be shown in the accounts and a old partner has retired and a new one brought in. In this case u credit the Goodwill account (thus closing it) and debit the NEW 4 partners' capital accounts by the proportions give. This will reduce their capital accounts. 

I hope this is helpful and easy to understand.Read over ur notes on Goodwill and changes in partnership again with the above in mind and hoefully the pieces will fall together....thats how I got over my mental block! 

• Jennifer
• 
  Quote
  

• # 98514
• Wed 26 Mar 2014 06:36 PM

Hi Christina

Did you have any luck on this question?
I have just gone onto this and still finding it difficult to work out, I have done everything listed below and just cannot get the totals to match, I know it will be something completely obvious but at the minute can't see it!
Any help would be most appreciated.
Many thanks
Katie 

• 
  Quote
  

• # 98539
• Thu 27 Mar 2014 11:28 AM

As Jennifer says you need to work out the goodwill on the current partners ratio then Ashton retires and Chandos is introduced so the partner ratio changes so the goodwill is worked out again.

Do a small table showing the goodwill at start and then at the end as you are shown in your manual.  The loss/gain is then entered into the capital accounts as a goodwill adjustment.

Ashton leaves £80,000 as a loan so this also needs to be shown in his capital account and the balance on his account paid out to him.

Chandos £30,000 is shown in his capital account and then these entries are reflected in the balance sheet extract.

Hope this helps but get back to me if you are still unsure.

Lesley

lesley@mycourse.co.uk

• Lesley Smith
  Course Tutor
  lesley@mycourse.co.uk
  Mycourse Training
  0800 862 0601

  www.mycourse.co.uk

   

• 
  Quote
  

• # 98876
• Tue 08 Apr 2014 05:00 PM

Hi Christina

How did you get on with this, I totally agree it is my nemisis too!  I am baffled with the c/d figure?

Suzanne

• Suzanne
• 
  Quote