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

Answer 1

Answer:

$20,000

Explanation:

The problem simply asks for Eng's initial capital balance in Cor-Eng partnership and it is just Eng's contributed cash of $2,000 to form the partnership.

No need to dwell on the other amounts. Just focus on what was being asked and you'll not get lost ^_^