Paul and Ray Sell Musical Instruments Through Their Partnership

question 30

Essay

Paul and Ray sell musical instruments through their partnership.To bring in additional funds and expertise,they decide to admit Janet to the partnership.Paul's capital is $400,000,Ray's capital is $200,000,and they share income in a ratio of 7:3,respectively.
Required
Record Janet's admission for each of the following independent situations:
a)Janet invests $180,000 for a one-fourth interest.Goodwill is to be recorded.
b)Paul and Ray agree that some of the inventory is obsolete.The inventory account is decreased before Janet is admitted.Janet invests $190,000 for a one-fourth interest.

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Definitions:

Vicarious Performance

Performance by another designated person of the obligations under a contract rather than the actual contracting party.

Qualified Person

An individual who possesses the necessary education, experience, and credentials to perform a specific job or task.

Privity of Contract

A legal concept stating that only the parties to a contract have the right to sue each other to enforce the terms of that contract.

Supreme Court Decision

A ruling issued by the Supreme Court, which is the highest court in many countries, setting a legal precedent.