Contributions for Different Methods
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If a partner is contributing attributes to a partnership such as established clientele or a particular expertise, what methods can be used to record the contribution? Why did you choose this method? Provide examples of the journal entries you would use.
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Solution Summary
This response analyses the different methods to record the contribution made by a partner in a business entity and also suggest which will be better method in the given case.
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Methods to Record the Contribution made by Partners
There are two methods for recording the contribution made by a partner in a business entity, detail of which is as follows:
Bonus Method:
Under bonus method, the amount of capital is split into equal amount irrespective of whether the partners have contributed different amount of funds in business. This is done because of intangible benefits provided by other partner in terms of expertise. This way, the new partner in business receives capital bonus for recognition of his artistic or other abilities contributed (Fischer et ...
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