Ch 13 HW Solutions

Ch 13 HW Solutions - Acct 3533 Advanced Accounting Ch 13...

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Acct 3533 Advanced Accounting Ch 13 Homework Solutions 18. There are two ways in which the partners could be credited with equal capital accounts upon formation: via the Bonus Method or via the Goodwill Method. The two questions that will determine which of these methods is employed are: Is there evidence of an unrecognized intangible asset upon formation of the partnership? If the answer to this question is, “no,” then the partnership should use the Bonus Method. If the answer is, “yes,” then a second question should be asked: If there is evidence of an unrecorded intangible asset, do the partners wish to record the intangible asset? If the answer to this second question is, “no,” then the partnership should use the Bonus Method. If the answer is, “yes,” then the partners should use the Goodwill Method. Assuming that the partners answer is “no,” to either of these questions, the partners would apply the Bonus Method . This involves recording the contributed net assets at their fair values and then allocating the capital accounts according to the proportions agreed upon by the partners. The following entry records the initial formation under the Bonus Method: Cash 60,000 Receivables 20,000 Inventories 40,000 Accounts payable 30,000 Accrued liabilities 20,000 Partner A Capital 35,000 Partner B Capital 35,000 (to record initial capital contribution to the Partnership using the
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