Question

In: Accounting

1. R and D formed a partnership on February 10, 2020. R contributed cash of $150,000,...

1. R and D formed a partnership on February 10, 2020. R contributed cash of $150,000, while D contributed inventory with a fair value of $120,000. Due to R's expertise in selling, D agreed that R should have 60 percent of the total capital of the partnership. R and D agreed to recognize goodwill. Give journal entries for the partnership formation

2. Luqmaan and Idris drafted a partnership agreement that lists the following assets contributed at the partnership's formation:

	Contributed by
	Luqmaan	Idris
Cash	$20,000	$30,000
Inventory	0	15,000
Building	0	40,000
Furniture & Equipment	15,000	0

The building is subject to a mortgage of $10,000, which the partnership has assumed. The partnership agreement also specifies that profits and losses are to be distributed evenly. Give journal entries.

Expert Solution

1. Journal entries for partnership firm formation

- R's contribution- $ 150000 Cash

- D's contriution - $ 120000 inventory

Journal entry in the books of partnership firm :

Cash a/c Dr. $ 150000

To R's Capital a/c $150000

( Being Cash brought by R in the form of capital )

Inventory a/c Dr $120000

To D's Capital a/c $120000

( Being inventory brought by D in the form of capital )

Since R and D mutually decide that due to selliong expertise of R , total capital of R shall be 60% of firm's capital .

Total Capital ( 120000 + 150000 = $ 270000)

60% of $270000 = $162000

R's contribution in firm = $150000

Goodwill amount = 162000- 150000 = $12000

Journal entry for this transaction :

Goodwill a/c Dr. $12000

To R's Capital a/c $12000

( Being Goodwill debited by increasing R's capital )

2.

Cash a/c Dr $20000

Furniture a/c Dr. $15000

To Luqmaan's captia a/c $35000

( Being capital introdused by Luqmaan in the form of Cash and Furniture )

Cash a/c Dr. $30000

Inventory a/c Dr. $15000

Building a/c Dr. $40000

To Idris's Capital a/c $85000

( Being capital introdused by Idris in the form of Cash , inventory and building )

Since building is subjet to Mortgage $ 10000 so , Irdis's capital shall be downsized by $10000.

Idris's Capital a/c Dr. $10000

To building a/c $10000

(Being building is subjetc to mortgaged $ 10000)

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