The Questions for this weeks diccusion is listed below, I also have my response and just want to make sure I am answering it correctly.

Question: 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 thebonusmethod or thegoodwillmethod. Please compare and contrast these methodologies in the formation of a partnership.Feel free to use examples.

My Answer

When two or more individuals form a partnership, the assets they bring with them into the association may be disproportionate. In this event, the capital assignment may be based on thebonusmethod or thegoodwillmethod. Please compare these methodologies in the formation of a partnership. Feel free to use examples.

A partnership is established when two more people form an organization (Colorado State University-Global Campus, 2019). Each owner can contribute assets to the newly formed partnership; however, the assets' costs may differ from owner to owner. As such, the assignment of capital may be based on the bonus method or the goodwill method.

To determine whether the bonus or goodwill method is used, the partners will have to determine if the capital contribution possesses an unrecognized intangible asset. Suppose the partners' contribution will decide whether they want to recognize their books' intangible assets. If the assistance does not possess an unknown intangible asset, then the bonus method will apply; otherwise, the goodwill method will apply for capital account reallocation (Halsey & Hopkins, 2017).

The bonus method gives the existing partners an increase in their capital accounts if the new partner's assets are paid at a premium (Halsey & Hopkins, 2017). For instances, Orion has two partners, Shawn and Moe, their partnership agreement splits everything 50-50. They decide to bring in a third partner, Jason, with only 15% ownership. Orion's assets are worth $1,200,000 with Jason contribution of $300,000. 15% of $1,200,000 is $180,000, therefore Jason contributed $120,000 over the actual value. The $120,000 is then split into Shawn, and Moe's capital accounts equally.

The goodwill method is used when an intangible asset is present. Instead of giving a bonus to the partners, the goodwill account is credited (Halsey & Hopkins, 2017). Referring to the example above but now we assume an intangible asset is present. Instead of crediting Shawn and Moe's capital accounts, we now credit goodwill and then offset this credit by debiting their capital accounts. This sets up a goodwill account for the intangible asset that was contributed by Jason.