Parker,Smith,and James Form a Partnership

question 17

Essay

Parker,Smith,and James form a partnership.Parker contributes $60,000 cash and Smith contributes $20,000 in cash.James contributes equipment with a fair value of $25,000.Prepare the journal entry to record the formation of the partnership.

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Definitions:

Inventory

The goods and materials that a business holds for the ultimate goal of resale or processing.

Absorption Costing

An approach to calculating costs that encompasses all expenses related to production, including direct materials, direct labor, and all manufacturing overheads, whether they are variable or fixed, within a product's cost.

Variable Costing

A cost accounting method that only allocates variable production costs to products, while fixed costs are treated as period expenses.

Net Income

The net earnings of a business once all costs, taxes, and expenses have been deducted from its total income.