The capital accounts and the profit sharing ratio of Pancho and Villa are shown below: Capital P/L ratio Pancho 100,000 50% Villa 50,000 50% Total 150,000 100% Espinosa invests 40,000 for a 20% interest in the new firm. He will share 15% in the profits and the balance will be divided equally. REQUIRED: a. Journal entry to record the admission of Espinosa using the goodwill method. b. Give the entry if the bonus method is used. c. What is Espinosa's gain by the use of the method preferred?

The capital accounts and the profit sharing ratio of Pancho and Villa are shown below: Capital P/L ratio Pancho 100,000 50% Villa 50,000 50% Total 150,000 100% Espinosa invests 40,000 for a 20% interest in the new firm. He will share 15% in the profits and the balance will be divided equally. REQUIRED: a. Journal entry to record the admission of Espinosa using the goodwill method. b. Give the entry if the bonus method is used. c. What is Espinosa's gain by the use of the method preferred?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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