Aubrey and Bella form a partnership in which they will share capital in a 2:3 ratio. Aubrey contributes $200,000 in cash. Bella contributes cash of $100,000 and assets having the following fair market values:
•Inventory, $150,000
•Equipment, $275,000
Required
Prepare the entry to record the formation of the partnership, under each of the following methods:
a. The bonus approach
b. The goodwill approach

Question

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The Answer of Aubrey and Bella form a partnership in which they will share capital in a 2:3 ratio. Aubrey contributes $200,000 in cash. Bella contributes cash of $100,000 and assets having the following fair market values:
•Inventory, $150,000
•Equipment, $275,000
Required
Prepare the entry to record the formation of the partnership, under each of the following methods:
a. The bonus approach
b. The goodwill approach

Aubrey and Bella Form a Partnership in Which They Will