Able and Baker have agreed to form a partnership. Both of them already had proprietorships, and those assets were going to be combined to form the partnership. The fair value of Able and Baker’s assets and liabilities are listed below. Able’s Contribution Baker’s Contribution Cash $ 5,000 $20,000 Inventory 5,000 40,000 Land 50,000 Building 30,000 Equipment 10,000 20,000 Liabilities assumed (10,000) ______ Net assets contributed $90,000 $80,000 Assuming that Able and Baker have agreed to have equal equity balances, prepare the journal entry to record the partnership using The bonus method 2. The goodwill method
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Able and Baker have agreed to form a
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Able’s Contribution |
Baker’s Contribution |
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Cash |
$ 5,000 |
$20,000 |
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Inventory |
5,000 |
40,000 |
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Land |
50,000 |
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Building |
30,000 |
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Equipment |
10,000 |
20,000 |
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Liabilities assumed |
(10,000) |
______ |
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Net assets contributed |
$90,000 |
$80,000 |
Assuming that Able and Baker have agreed to have equal equity balances, prepare the
- The bonus method
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2. The
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