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Partnership Formation

Claire, Dolly, and Ellery formed a partnership and each contributed assets at book value. Claire contributed cash, accounts receivable, and property, plant, and equipment. Dolly contributed cash and property, plant, and equipment. Ellery contributed cash and accounts receivable. The partnership assumed mortgages on Claire and Dolly's property. After adjustments to fair value, the partners agreed to share interests in a 4:3:3 ratio. The partnership used the goodwill method to allocate capital balances, resulting in goodwill amounts to Dolly and Ellery.

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Jules Aguilar
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240 views3 pages

Partnership Formation

Claire, Dolly, and Ellery formed a partnership and each contributed assets at book value. Claire contributed cash, accounts receivable, and property, plant, and equipment. Dolly contributed cash and property, plant, and equipment. Ellery contributed cash and accounts receivable. The partnership assumed mortgages on Claire and Dolly's property. After adjustments to fair value, the partners agreed to share interests in a 4:3:3 ratio. The partnership used the goodwill method to allocate capital balances, resulting in goodwill amounts to Dolly and Ellery.

Uploaded by

Jules Aguilar
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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JULES AGUILAR

Claire, Dolly and Ellery formed the CDE Partnership on September 1, 2016, with the following assets, measured
at book values in their respective records, contributed by each partner:

CLAIRE DOLLY ELLERY


Cash 486,000 460,107 231,903
Accounts Receivable 109,620 - 141,000
Property, Plant and Equipment  2,094,390 450,000 -

PPE of Claire and Dolly are mortgaged with the bank for P1, 458, 000 and P108, 000, respectively. The
partnership is to assume responsibility for these PPE mortgages. The fair value of the accounts receivable
contributed by Ellery is P137, 000 while the PPE contributed by Dolly at this date is P510, 300. The partners have
agreed to share interests on a 4:3:3 ratio, to Claire, Dolly and Ellery, respectively.

Book of Claire

Accounts Book Values Adjustments Adjusted Balances


Cash 486,000 486,000
Accounts Receivables 109,620 109,620
PPE 2,094,390 2,094,390
Mortgage Payable 1,458,000 1,458,000

Claire Capital 2,690,010 1,458,000 1,232,010


Total

Closing Books of Claire

DR CR
Mortgage Payable 1,458,000
Claire Capital 1,232,010
Cash 486,000
Accounts Receivables 109,620
PPE 2,094,390
Book of Dolly

Accounts Book Values Adjustments Adjusted Balances


Cash 460,107 460,107
Accounts Receivable 0 0
PPE 450,000 60,300 510,300
Mortgage Payable 108,000 108,000

Dolly Capital 910,107 47,000 862,407


Total

Closing Books of Dolly

DR CR
Mortgage Payable 108,000
Dolly Capital 862,407
Cash 460,107
Accounts Receivables 0
PPE 510,300

Book of Ellery

Accounts Book Values Adjustments Adjusted Balances


Cash 231,903 231,903
Accounts Receivable 141,000 4,000 137,000
PPE 0 0 0
Mortgage Payable - -

Ellery Capital 372,903 4,000 368,903


Total

Closing Books of Ellery

DR CR
Mortgage Payable -
Dolly Capital 368,903
Cash 231,903
Accounts Receivables 137,000
PPE 0
Partnership Formation
Cash 1,178,000
Accounts Receivable 246,620,
Property, Plant, Equipment 2,604,690
Mortgage Payable 1,506,000
Claire, Capital 1,232,010
Dolly, Capital 862,407
Ellery, Capital 368,903

Goodwill Method

Contributed Capital Agreed Capital


Claire 1,232,010 1,232,010
Dolly 862,407 862,407
Ellery 368,903 368,903
Goodwill to Dolly 61,600.50
Goodwill to Ellery 555,104.50

Total 2,463,320 3,080,025

Bonus Method

Contributed Capital Agreed Capital


Claire 1,232,010 985,328
Dolly 862,407 738,996
Ellery 368,903 368,903
Bonus to Ellery 370,093

Total 2,463,320 2,463,320

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