C is corrent. Dixon is being paid $74,000 for his interest. His capital account balance is $50,000 ($210,000 – $160,000). Thus an additional $24,000 was paid to him for his share of goodwill. The withdrawing partner shares in profits and losses at a 20% rate, so the $24,000 is 20% of total goodwill, which therefore must be $120,000 ($24,000 ÷ 20%).
A is incorrect. Dixon is being paid $74,000 for his interest. His capital account balance is $50,000 ($210,000 – $160,000). Thus an additional $24,000 was paid to him for his share of goodwill. The withdrawing partner shares in profits and losses at a 20% rate, so the $24,000 is 20% of total goodwill, which therefore must be $120,000 ($24,000 ÷ 20%).
A is incorrect. Dixon is being paid $74,000 for his interest. His capital account balance is $50,000 ($210,000 – $160,000). Thus an additional $24,000 was paid to him for his share of goodwill. The withdrawing partner shares in profits and losses at a 20% rate, so the $24,000 is 20% of total goodwill, which therefore must be $120,000 ($24,000 ÷ 20%).
D is incorrect. Dixon is being paid $74,000 for his interest. His capital account balance is $50,000 ($210,000 – $160,000). Thus an additional $24,000 was paid to him for his share of goodwill. The withdrawing partner shares in profits and losses at a 20% rate, so the $24,000 is 20% of total goodwill, which therefore must be $120,000 ($24,000 ÷ 20%).
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