Reference no: EM133109564

Question - Partnership Formation: Bonus and Goodwill Approach - John, Jeff and Jane decided to engage in a real estate venture as a partnership. John invested 100,000 cash and Jeff provided office equipment that is carried on his books at PHP 82,000. The partners agree that the equipment has a fair value of PHP 110,000. There is a PHP 30,000 note payable remaining on the equipment to be assumed by the partnership. Although Jane has no physical assets to invest in the partnership, both John and Jeff believe that her experience as a real estate appraiser is a valuable skill needed by the partnership an is a basis for granting her a capital interest in the partnership.

Required - Assuming that each partner is to receive an equal capital interest in the partnership:

1. Record the partnership formation under the bonus method.

2. Record the partnership formation under the goodwill (revaluation of asset) method and assume a total goodwill of PHP 90,000.

3. Discuss the appropriateness of using either a bonus or goodwill methods to record the formation of the partnership.