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    Sheila Mae Araman
    The document summarizes the balance sheet for the McCune, Nall, and Oakley partnership. It shows the partners share profits and losses in a 2:3:5 ratio respectively. It also states the partnership will admit Pavic for a one-fifth interest, and revalue assets including increasing the value of land to $100,000 and inventory to $87,500, recognizing $15,000 of goodwill.

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    Formation

    Uploaded by

    Sheila Mae Araman
    1K views2 pages
    The document summarizes the balance sheet for the McCune, Nall, and Oakley partnership. It shows the partners share profits and losses in a 2:3:5 ratio respectively. It also states the partnership will admit Pavic for a one-fifth interest, and revalue assets including increasing the value of land to $100,000 and inventory to $87,500, recognizing $15,000 of goodwill.

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    The document summarizes the balance sheet for the McCune, Nall, and Oakley partnership. It shows the partners share profits and losses in a 2:3:5 ratio respectively. It also states the partnership will admit Pavic for a one-fifth interest, and revalue assets including increasing the value of land to $100,000 and inventory to $87,500, recognizing $15,000 of goodwill.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    1K views2 pages

    Formation

    Uploaded by

    Sheila Mae Araman
    The document summarizes the balance sheet for the McCune, Nall, and Oakley partnership. It shows the partners share profits and losses in a 2:3:5 ratio respectively. It also states the partnership will admit Pavic for a one-fifth interest, and revalue assets including increasing the value of land to $100,000 and inventory to $87,500, recognizing $15,000 of goodwill.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    A summary balance sheet for the McCune, Nall, and Oakley partnership

    appears below. McCune, Nall, and Oakley share profits and losses in a
    ratio of 2:3:5, respectively.

    Assets
    Cash $ 50,000
    Inventory 62,500
    Marketable securities 100,000
    Land 50,000
    Building-net 250,000
    Total assets $ 512,500

    Equities
    McCune, capital $ 212,500
    Nall, capital 200,000
    Oakely, capital 100,000
    Total equities $ 512,500

    The partners agree to admit Pavic for a one-fifth interest. The fair
    market value of partnership land is appraised at $100,000 and the
    fair market value of inventory is $87,500. The assets are to be
    revalued prior to the admission of Pavic and there is $15,000 of
    goodwill that attaches to the old partnership.

    LO2
    6. By how much will the capital accounts of McCune, Nall, and
    Oakley increase, respectively, due to the revaluation of the
    assets and the recognition of goodwill?

    a. The capital accounts will increase by $25,000 each.


    b. The capital accounts will increase by $30,000 each.
    c. $18,000, $27,000, and $45,000.
    d. $20,000, $25,000, and $30,000.

    LO2
    7. How much cash must Pavic invest to acquire a one-fifth
    interest?

    a. $117,500.
    b. $120,500.
    c. $146,875.
    d. $150,625.

    ANSWER:

    6. c The assets will be valued upward by $90,000 which,


    allocated on a 2:3:5 basis, yields $18,000 to McCune,
    $27,000 to Nall, and $45,000 to Oakely.
    7. d After the revaluation, the assets will be recorded at
    $602,500. If Pavic is admitted for a one-fifth
    interest, the $602,500 represents 80% of the total
    implied capital. Dividing $602,500 by 80% gives a total
    capitalization of $753,150 for which $150,625 is
    required from Pavic for a 20% interest.

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