Assume that two individuals agree to form a partnership. Partner A is contributi

Question

Assume that two individuals agree to form a partnership. Partner A is contributing an operating business that reports the following balance sheet:

.$ 60,000

Accounts payable.

$ 80,000

Accrued liabilities

Total liabilities

$140,000

Total assets

$240,000

Net assets

Partner B is contributing cash of $140,000. The partners agree that the initial capital of the partnership should be shared equally.

Required: Prepare the journal entry to record the capital contributions of the partners assuming that the partners wish to employ the Bonus Method.

Cash

.$ 60,000

Accounts payable.

$ 80,000

Receivables 80,000

Accrued liabilities

60,000 Inventories 100,000

Total liabilities

$140,000

Total assets

$240,000

Net assets

$100,000

Explanation / Answer

Answer:

Patrner's B share shall be treated as 120,000 and Bonus 20,000 (140,000-120,000) shall be credited in Partner's A capital.

Journal Entries Date Accounts Debit $ Credit $ Cash      60,000.00 Receivable      80,000.00 Inventories    100,000.00 Accounts payable      80,000.00 Accrued Liabilites      60,000.00 Cash    140,000.00 Partner'A Capital account    100,000.00 Partner'B Capital account    120,000.00 Partner'A Capital account      20,000.00

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.