Paul and Ray Sell Musical Instruments Through Their Partnership

question 41

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 and the recording of goodwill or inventory write-down,as indicated,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b)Paul and Ray agree that some of the inventory is obsolete.The inventory account is decreased before Janet is admitted.Janet invests $190,000 for a one-fourth interest.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:

Milling Department

A specific division within a manufacturing facility where milling processes, such as grinding, crushing, or cutting, are performed on raw materials.

Plantwide Predetermined Manufacturing Overhead Rate

A single overhead rate calculated for an entire manufacturing plant, used to allocate manufacturing overhead costs to products based on a common activity base, such as machine hours.

Machine-Hours

A measure of the total hours that machinery is in operation during the production process.

Markup

The amount added to the cost of a product to create a price point that ensures profit for the company.