Farmation of partnership Assume that two individuals agree to form a partnership
ID: 2586125 • Letter: F
Question
Farmation of partnership Assume that two individuals agree to form a partnership. Partner A is contributing an operating business that reports the following balance sheet is contributing that reports the following balance sheet Cash $10,000 Accounts payable $30,000 Recelvables 20,000 Accrued labilitles 20000 Inventortes 40,000 es $50,000 Total assets $70,000 Net assets $20,000 Partner B is contributing cash of $50,000. The partners agree that the initial entry to record the capital contributions of the partners using both the Bonus Method and the Goodwill Method. capital of the partnership should be shared equally, Prepare the Debit Credit Bonus Method: Cash Recevables Accounts payable Accrued liabieies Partner B Capital Goodwill Method: Cash Recevabies Accounts payableExplanation / Answer
Entry:
Goodwill method:
Partner contributing highest asset with 50000 for 50% is considered base for goodwill calculation. since he is contributing 50000 for 50% share, fair value of 100% will be = 50000 *100%/50%= 100000
Partner A is contributing only 20000 for 50% share balance 30000 will be recorded as goodwill.
Entry:
Bonus method: Net assets contribution: Partner A 20000 Partner B 50000 Total assets 70000 Total assets is shared equally, hence Share of Partner A 35000 Partner B 35000 Total 70000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.