# E 16-7Recording new partner investmentThe capital accounts of the Fax and Bel partnership on September 30, 2011, were:Fax capital (75% profit percentage) Bel capital (25% profit percentage)Total capital\$140,000 60,000 \$200,000On October 1, Rob was admitted to a 40 percent interest in the partnership when he purchased 40 percent of each existing partner’s capital for \$120,000, paid directly to Fax and Bel.REQUIRED1. Determine the capital balances of Fax, Bel, and Rob after Rob’s admission to the partnership if goodwill is not recorded.2. Determine the capital balances of Fax, Bel, and Rob after Rob’s admission to the partnership if goodwill is recorded, assuming that the book value and fair value of recorded assets are equal.

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E 16-7

Recording new partner investment

The capital accounts of the Fax and Bel partnership on September 30, 2011, were:

Fax capital (75% profit percentage) Bel capital (25% profit percentage)

Total capital

\$140,000 60,000 \$200,000

On October 1, Rob was admitted to a 40 percent interest in the partnership when he purchased 40 percent of each existing partner’s capital for \$120,000, paid directly to Fax and Bel.

REQUIRED

1. Determine the capital balances of Fax, Bel, and Rob after Rob’s admission to the partnership if goodwill is not recorded.

2. Determine the capital balances of Fax, Bel, and Rob after Rob’s admission to the partnership if goodwill is recorded, assuming that the book value and fair value of recorded assets are equal.

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Step 1

1.

Calculation of capital balances for Fax, Bel, and Rob is as follows:

Resu...

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