Determining characteristics of a partnership and accounting for partner contributions
Susan Murphy and John Oâ€™Sullivan are forming a partnership, Irish Leather Goods, to import merchandise from Ireland. Murphy is especially artistic and will travel to Ireland to buy the merchandise. Oâ€™Sullivan is a super salesman and has already lined up several department stores to sell the leather goods.
1. What is the purpose of the partnership agreement?
2. If the partnership agreement does not state the profit-and-loss-sharing ratios, how will profits or losses be shared?
3. Murphy is contributing $150,000 in cash and accounts payable of $40,000. Oâ€™Sullivan is contributing a building that cost Oâ€™Sullivan $60,000. The buildingâ€™s current market value is $85,000. Journalize the contribution of the two partners.