Cor-Eng Partnership was formed on January 2, 20X1. Under the partnership agreeme

Question

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 20X1 net income was $25,000. Eng's initial capital balance in Cor-Eng is A. $25,000 B. $20,000. C. $60,000. D $40.000,

Explanation / Answer

Option "C $60,000 is correct Cor Eng Total Ratio 60% 40% 100% Assets        60,000        20,000        80,000 Goodwill        40,000        40,000 Initial Capital balance will be same of both partners        60,000        60,000     1,20,000 Add:Net income        15,000        10,000        25,000 Less:Drawing         -3,000         -9,000       -12,000 Year End balance        72,000        61,000     1,33,000

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