Partnerships When two or more individuals come together to form a partnership, the assets that they bring with them into the partnership may be disproportionate. In this event, the assignment of capital may be based on the bonus method or the goodwill method. Please compare and contrast these methodologies in the formation of a partnership. Feel free to use examples.

Partnerships When two or more individuals come together to form a partnership, the assets that they bring with them into the partnership may be disproportionate. In this event, the assignment of capital may be based on the bonus method or the goodwill method. Please compare and contrast these methodologies in the formation of a partnership. Feel free to use examples.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter15: Partnership Accounting

Section: Chapter Questions

Problem 7MC: Which one of the following would not be considered in the development of a partnership agreement? A....

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Partnerships

When two or more individuals come together to form a partnership, the assets that they bring with them into the partnership may be disproportionate. In this event, the assignment of capital may be based on the bonus method or the goodwill method. Please compare and contrast these methodologies in the formation of a partnership. Feel free to use examples.

Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

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Which of the following is a disadvantage of the partnership form of organization? A. limited life B. no taxation at the partnership level C. flexibility in business operations D. combining of financial resources
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Any assets invested by a particular partner in a partnership ________. A. do not become a partnership asset but instead remain with the partner B. can be used only by the investing partner C. become the property of all the partners D. are the basis for all profit sharing
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What is a good response to this statement? In this discussion post we are tasked with comparing the goodwill method and bonus method when individuals form a partnership but bring different amounts of assets. To begin the goodwill method can be described as a way for the partner with a lower amount of assets to pay off the partner with the higher amount of assets. For example, the fair value and the book value of the assets will be considered, once this is done the partners can agree on a fair value price the partner with the smaller amount of assets would pay to the other partner. An example of this could be if partner A had 100,000 worth of assets and partner b only had 80,000 worth of assets partner A could pay a lump sum to partner b either once or on a period-by-period basis for a set amount of time (Brown, 2020). This would ensure that the partner with the greatest amount of assets is being compensated fairly for the additional resources and investment they have brought to the…
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