Assume that the initial noncash contributions of the partners are recorded at fair market value. Compute the ending balance of each capital account under the bonus and goodwill approaches.

Assume that the initial noncash contributions of the partners are recorded at fair market value. Compute the ending balance of each capital account under the bonus and goodwill approaches.

Computing initial partner investments

Car and Lam establish an equal partnership in both equity and profits to operate a used-furniture business under the name C&L Furniture. Car contributes furniture inventory that cost $120,000 and has fair value of $160,000. Lam contributes $60,000 cash and delivery equipment that cost $80,000 and has a fair value of $60,000.

Required: Assume that the initial noncash contributions of the partners are recorded at fair market value. Compute the ending balance of each capital account under the bonus and goodwill approaches.


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