The trial balances of two proprietorships on January 1, 2021, follow: Domic and Dasilva decide to form

Question:

The trial balances of two proprietorships on January 1, 2021, follow:

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Domic and Dasilva decide to form a partnership on January 1 and agree on the following valuations for the noncash assets that they are each contributing:

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All of the assets in each of the proprietorships will be transferred to the partnership. The partnership will also assume all the liabilities of the two proprietorships. Domic and Dasilva are also agreed that Dasilva will invest the amount of cash required so their investments in the partnership are equal.

Instructions

a. What are the advantages and disadvantages for these two individuals of forming a partnership as opposed to setting up a corporation?

b. Prepare separate journal entries to record the transfer of each proprietorship?s assets and liabilities to the partnership on January 1.

c. Journalize the additional cash investment.

Taking It Further

What are some of the advantages of two individuals such as Domic and Dasilva operating as a partnership instead of as two separate proprietorships?

Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
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Related Book For  book-img-for-question

Accounting Principles Volume 2

ISBN: 978-1119502555

8th Canadian Edition

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

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