Question

The Will Wiley partnership has two partners and each partner has 50,000 invested in the firm. Woods is admitted to the partnership for one-third interest and invests80,000. Wood's partnership account would be credited for: ?

1) $50,000
2) $60,000
3) $80,000

Answer 1

Woods' partnership account would be credited with $80,000, which is the amount he invested to obtain a one-third interest in the partnership.

Step-by-step explanation:

The Will Wiley partnership has initially two partners, each with $50,000 invested in the firm. When Woods is admitted to the partnership for a one-third interest and invests $80,000, the question is what Wood's partnership account would be credited for.

Given that the two original partners have a total investment of $100,000 (2 partners x $50,000 each), a one-third interest suggests that the total value of the partnership after admitting Woods would be $120,000 (since $40,000 is one-third of $120,000 and Wood's is buying a one-third interest). Therefore, for Woods to have a one-third interest worth $40,000, the additional $40,000 ($80,000 - $40,000) is likely meant to cover any implied good will or other intangible value of the partnership. However, the question doesn't give enough context to determine if good will should be accounted for. So, based solely on the information given, Woods would be credited $80,000, which is the amount of cash Woods invested.