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. Cor's share of Cor-Eng's 20X1 net income is

Answer 1

Answer:

Cor's share of Cor-Eng's 20X1 net income is $60,000

Explanation:

                                Partnership Table

                                               Cor$        Eng$        Total$

Ratio                                         60%        40%         100%

Assets                                  60,000      20,000     80,000

Goodwill                                                40,000      40,000

Initial Capital balance        60,000     60,000     120,000

Add: Net income                  15,000       10,000     25,000

Less: Drawing                      -3,000        -9,000     -12,000

Year End balance                 72,000      61,000    133,000