Partnership Formation Max, Nat and Roberta formed a partnership to operate a dry-cleaning business. They agreed to
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Partnership Formation
Max, Nat and Roberta formed a partnership to operate a dry-cleaning business. They agreed to share initial capital and subsequent income in a 3:2:1 ratio. Each partner's contributions to the new venture are listed next. Max: $32,000 cash, dry-cleaning equipment worth $240,000 and the ability to keep the equipment in good operating condition. Nat: $64,000 cash and extensive experience in the dry-cleaning business. Roberta: $24,000 cash and a 2-year $96,000 note, payable to the firm, with 12 percent interest on the unpaid balance.
Required
(a) Record the formation using the goodwill approach.
| General Journal | ||
|---|---|---|
| Description | Debit | Credit |
| Cash | ||
| Note receivable | ||
| Equipment | ||
| Goodwill | ||
| Capital - Max | ||
| Capital - Nat | ||
| Capital - Roberta | ||
(b) Record the formation using the bonus approach.
| General Journal | ||
|---|---|---|
| Description | Debit | Credit |
| Cash | ||
| Note receivable | ||
| Equipment | ||
| Capital - Max | ||
| Capital - Nat | ||
| Capital - Roberta | ||
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Partnership Formation Max Nat and Roberta formed a partnership to operate a drycleaning business The... View the full answer
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