Two sole proprietors, L and M, agreed to form a partnership on January 1, 2013. The trial balance for each proprietorship is shown below as of January 1, 2013. Click the link at the bottom of the page to access a spreadsheet containing information from both proprietors.
The LM partnership will take over the assets and assume the liabilities of the proprietors as of January 1, 2013.
Discuss the following:
- The steps required to form the partnership
- Prepare and post the financials for LM Partnership and discuss the differences that you have with your colleagues
- 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?