《Level 2 Ch 6 Partnership - Goodwill Worksheet》.doc

Chapter 6 Partnership - Goodwill Classwork 1 What is goodwill? Under what situation that will be record in a partnership? How to post in Balance Sheet? Classwork 2 You want to sell the business and assets and liabilities are listed: Assets $ Liabilities $ Buildings 225,000 Long Term Liabilities 100,000 Machinery 75,000 Creditors 30,000 Debtors 60,000 Bank Overdraft 45,000 Stock 40,000 Mr. So paid $300,000 for the whole business, the extra payment $________is called “goodwill”. Classwork 3 It is agreed that the goodwill should be 3 times the average yearly sales for the past three years. Calculate the value of goodwill: Sales for the past three years: Year $ 2001 3,650,000 2002 5,000,000 2003 6,350,000 Average Sales = $ Goodwill = Classwork 4 A firm of accountants is selling its business. It is asking a figure for goodwill, which is 2.5 times the average annual fees, received for the last two years. Calculate the goodwill: Year Fee ($) 2001 1,800,000 2002 2,200,000 Average Sales = Goodwill = Classwork 5 Suppose goodwill is taken to be 4 times the average net profits for the past years. Year Net Profit ($) 2004 6,200,000 2005 6,900,000 2006 7,900,000 Average Sales = Goodwill = Classwork 6 R is admitted by bring in $4,000 cash. Goodwill is agreed to be $10,000 Old sharing ratio: L(2), M(5), S(3) New sharing Ratio: L(1), M(5), S(3), R(1) (a) Not to open a goodwill account – New partner pays his share of goodwill in cash into the business. Old partners share the $ by increasing their capital, i.e., goodwill adjustment. Cash $ $ Capital a/c – R Capital – R $ $ Goodwill Cash ~ capital introduced Capital – L $ $ Goodwill Bal b/d Goodwill Capital – M $ $ Goodwill Bal b/d X Goodwill Capital – S $