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(Solution) - Carson and Blake owned a successful insurance agency for many

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Carson and Blake owned a successful insurance agency for many years.
Currently their respective capital balances are $200,000 and $160,000; they share profits and losses in the ratio of 6:4. Manning, a famous pro athlete who recently retired, has expressed an interest in joining the agency. Carson and Blake believe that Manning's involvement would substantially boost sales and profits. They offer Manning a 20 percent interest in both capital and profits and losses without any requirement of an investment by Manning.
Required
a. Compute the balances in the capital accounts of Carson, Blake, and Manning after Manning's admission, assuming that the parties agree to record the admission by the bonus method.
b. Compute the balances in the capital accounts of Carson, Blake, and Manning after Manning's admission, assuming that the parties agree to record the admission by the goodwill method.

 







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This question was answered on: Jul 11, 2017

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