Goodwill

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jewels.p
jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
in AAT Level 3 (Level 6 in Scotland)
Can anyone help?

Andrea and Brian have a 50:50 profit share but agree to change it to Andrea -one-third and Brian two-thirds

Goodwill should be valued at £30,000.

Andrea has a cr balance of £35,000 and Brian a cr balance of £40,000 in the Capital Account.

It asks you to update the Capital Account

Am I right in putting a cr of £20,000 to Andrea's Capital Account and a cr of £10,000 to Brian's or do I need to write off £15,000 each first?:confused1:

Thanks

Julie

Comments

  • crispy
    crispy Registered Posts: 466 Dedicated contributor 🦉
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    Hello,

    First I would create the goodwill in the old profit sharing agreement,

    Dr Goodwill £30k
    Cr Andrea £15k
    Cr Brian £15k

    Then eliminate Goodwill under the new agreement,

    Dr Anrdrea £10k
    Dr Brian £20k
    Cr Goodwill £30k

    Think this is the right way around, normally goodwill involves a new partner entering the business?
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    crispy wrote: »
    Hello,

    First I would create the goodwill in the old profit sharing agreement,

    Dr Goodwill £30k
    Cr Andrea £15k
    Cr Brian £15k

    Then eliminate Goodwill under the new agreement,

    Dr Anrdrea £10k
    Dr Brian £20k
    Cr Goodwill £30k

    Think this is the right way around, normally goodwill involves a new partner entering the business?

    Thanks for that!:thumbup1: I had debited Andrea with £20k and Brian with £10k and wondered how Andreas balance had reduced when her profit share was higher! This unit is so confusing sometimes!:confused1:
  • Rachey
    Rachey Registered Posts: 589 Epic contributor 🐘
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    I have to agree with you on that one! Is it FRA your doing? Sometimes i lose the will to live!! I'm currently unable to come to terms with 'margins' Im absoultely fine with mark ups, but these margins will be the death of me! haha.

    Good Luck!!
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    Yes its FRA. Got marks back from my tutor for a mock exam I did and he recommended I do another one to be marked (What does that tell you!:laugh:)

    I keep reading on here that if you keep rereading sections it will eventually click but I'm still waiting on that happening!

    Oh No how many weeks until the Exam?.....................in fact how many hours............:crying:
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    Rachey wrote: »
    I have to agree with you on that one! Is it FRA your doing? Sometimes i lose the will to live!! I'm currently unable to come to terms with 'margins' Im absoultely fine with mark ups, but these margins will be the death of me! haha.

    Good Luck!!


    Have you done the David Nix Exam?

    Have been messaging Sally on this and we are both confused with the Cash Account figures in Task 1.1 Just wondered if you could shed any light on it:001_smile:

    Julie
  • Rachey
    Rachey Registered Posts: 589 Epic contributor 🐘
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    jewels.p wrote: »
    Have you done the David Nix Exam?

    Have been messaging Sally on this and we are both confused with the Cash Account figures in Task 1.1 Just wondered if you could shed any light on it:001_smile:

    Julie

    I'm afraid not. I planned on doing that one when i get back off holiday, i've heard it quite hard so i was saving the best till last!! :tongue_smilie:
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    If I was you I'd miss that exam out by mistake!

    Are you going abroad? I'm in Scotland and we've had rain all week but notice on the weather its been quite warm down south!

    Julie:001_smile:
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    crispy wrote: »
    Hello,

    First I would create the goodwill in the old profit sharing agreement,

    Dr Goodwill £30k
    Cr Andrea £15k
    Cr Brian £15k

    Then eliminate Goodwill under the new agreement,

    Dr Anrdrea £10k
    Dr Brian £20k
    Cr Goodwill £30k

    Think this is the right way around, normally goodwill involves a new partner entering the business?

    Oh no I have sent off my exam for marking and spent ages trying to work out why you debited Andrea 10k and Brian 20k when she had the higher profit sharing ratio. I have now just realised when I originally asked the question I put Andrea as one third and Brian as two thirds when it is the other way round! Oops and I had it right in the first place but changed it to Andrea 10k and Brian 20k on my paper for marking. Just hope I havent got anyone else as confused as me!:laugh:

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