[Oimie]

Cor-Eng Partnership was formed on January 2, 20X1. 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, 20X1, while Eng contributed $20,000 in cash. Drawings by the partners during 20X1 totaled $3,000 by Cor and $9,000 by Eng. Cor-Eng’s net income was $25,000.

Answer is 60,000.

Explanation: Recall that “each partner has an equal initial capital balance…” Thus, since Cor contributed assets valued at $60,000, Eng’s total contribution must also equal $60,000—goodwill valued at $40,000 in addition to the $20,000 cash. From the partnership perspective, the goodwill may be recorded since it was purchased in the admission of Eng.

And why exactly is the $60,000 the chosen number to be “equal”? Can’t it be the 20,000 that Eng contributed? And since Cor paid contributed 40,000 more, that 40,000 will be goodwill.

Roger only gave one example using the goodwill method and the story and calculation is way different so I can’t even compare to find what the rule is.

FAR 85 June 2015
AUD 80 Nov 2015
REG 83 Nov 2015
BEC 79 Feb 2016