Reference no: EM131017840
Question 1
Two sole proprietors, L and M, agreed to form a partnership on January 1, 2013. The trial balance for each proprietorship is shown as of January 1, 2013. The Trail balance has been send to every one of you as an excel spreadsheet.
The LM partnership will take over the assets and assume the liabilities of the proprietors as of January 1, 2013.
Discuss the following:
1.The steps required to form the partnership (by Tuesday)
2.Prepare and post the financials for LM Partnership and discuss the differences that you have with your colleagues (by Wednesday)
3.After Wednesday, consider the following: Assume that M agreed to recognize the goodwill generated by L's business. Accordingly, M agreed to recognize an amount for L's goodwill such that L's capital equaled M's capital on January 1, 2013. Given this alternative, how does the balance sheet prepared for #1 change?
Question 2
Assume that because of a new law, the types of significant transactions a partnership engages in are no longer lawful. Two of the five partners wish to wind up and terminate the partnership. Discuss the following:
1.Can these two partners require the partnership to be terminated?
2.Discuss the accounting for a liquidation where there is no deficit.
3.Discuss how the accounting differs if there is a deficit in one of the partner's capital accounts
4.How would the accounting for a liquidation differ for a lump-sum payment vs. installment payments?
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