| Course | ACC-6020 Advanced Accounting |
|---|---|
| Module | Module 9 |
| Paper type | Written Assignment 9: accounting for partnerships |
| Length | About 748 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | M.S. in Management in Accounting |
| Updated | October 2026 |
Free sample paper for ACC 6020 Module 9
Cole, Reyes and Patel, Engineers: Forming a Partnership, Dividing Its Profit and Admitting a Fourth Partner
Student Name
M.S. in Management in Accounting, Thomas Edison State University
ACC-6020: Advanced Accounting
Mentor Name
Month Day, Year
Cole, Reyes and Patel, Engineers: Forming a Partnership, Dividing Its Profit and Admitting a Fourth Partner
Introduction
A partnership has no shares; each partner owns a capital account that rises with contributions and income and falls with withdrawals and losses. The partnership agreement, not accounting standards, decides how profits are shared, so the accountant's job is to apply the agreement precisely (Jeter & Chaney, 2011). Where the agreement is silent, state partnership law, based on the Revised Uniform Partnership Act, divides profits equally.
Problem 1: Formation
On January 2, 2026, three engineers formed the partnership.
Property brought into the firm goes in at what it is worth today, not at the partner's old carrying amount, since each capital account should show the value actually contributed. Reyes's capital is the rig's $80,000 fair value less the $20,000 loan the partnership assumed.
| Partner | Contribution | Fair value | Liability assumed by the firm | Opening capital |
|---|---|---|---|---|
| Ana Cole | Cash | $120,000 | None | $120,000 |
| Luis Reyes | Truck-mounted survey rig, book value $50,000 on his own records | 80,000 | Equipment loan of $20,000 | 60,000 |
| Priya Patel | Cash | 60,000 | None | 60,000 |
| Total | | $260,000 | $20,000 | $240,000 |
Problem 2: Allocating First-Year Profit
The agreement provides annual salaries of $42,000 to Cole, $38,000 to Reyes and $30,000 to Patel, interest of 10% on beginning capital and any remainder in the ratio 40:30:30. Profit for 2026 was $210,000.
Salaries and interest here are allocation devices, not expenses; they decide how profit is divided, and if profit had been less than $134,000, the remainder would have been negative and shared as a loss in the 40:30:30 ratio. With no withdrawals, capital at year end is $202,400 for Cole, $128,800 for Reyes and $118,800 for Patel, a total of $450,000.
Withdrawals during the year would reduce each partner's capital but would not change the allocation of profit, since the agreement bases interest on beginning capital.
| Allocation | Cole | Reyes | Patel | Total |
|---|---|---|---|---|
| Salaries | $42,000 | $38,000 | $30,000 | $110,000 |
| Ten percent on opening capital | 12,000 | 6,000 | 6,000 | 24,000 |
| Remainder of $76,000 at 40:30:30 | 30,400 | 22,800 | 22,800 | 76,000 |
| Share of profit | $84,400 | $66,800 | $58,800 | $210,000 |
Problem 3: Admitting a New Partner
Thanh Nguyen bought in on January 2, 2027, paying $100,000 for a one-fifth share of capital and profits. Total capital after her investment is $550,000, and 20% of that is $110,000, more than she paid. The two methods record this differently.
Under the bonus method, total capital equals the assets actually contributed, and existing partners give up part of their capital to the newcomer, which makes sense if she brings a valuable client base. Under the goodwill method, the firm records $12,500 of goodwill attributed to the new partner. The bonus method is generally preferred because it records no internally generated goodwill, which accounting standards otherwise do not permit.
Under the goodwill method instead, the partners would value the firm at the old partners' $450,000 divided by 80 percent, or $562,500, and credit $12,500 of goodwill to Nguyen, so her capital of $112,500 is exactly 20 percent. The goodwill method records an intangible that no transaction has measured, which is why many firms prefer the bonus method.
| Bonus method | Amount |
|---|---|
| Total capital after admission: $450,000 + $100,000 | $550,000 |
| Nguyen's 20% capital credit | 110,000 |
| Bonus to Nguyen from existing partners | 10,000 |
| Charged to Cole, Reyes and Patel at 40:30:30 | Cole $4,000; Reyes $3,000; Patel $3,000 |
| Goodwill method | Amount |
| Existing capital of $450,000 is 80% of the new total, so total capital is $450,000 / 0.80 | $562,500 |
| Nguyen's 20% capital | 112,500 |
| Goodwill attributed to Nguyen: $112,500 minus $100,000 cash | 12,500 |
A Note on Liquidation
If the partnership later liquidates, it sells its assets, shares any gain or loss on sale among the partners in their profit ratio, pays outside creditors first, then any loans from partners, and distributes remaining cash according to capital balances. A partner whose capital becomes negative must contribute cash; if that partner cannot, the deficiency is absorbed by the others in their relative profit ratio.
Why Agreements Matter
Most disputes in professional partnerships arise over how profits and admission terms are divided. Writing the formula, including what happens when profit falls short of salaries and interest, into the agreement prevents arguments later, and the accounting simply carries the agreement out (National Conference of Commissioners on Uniform State Laws, 1997). Huddart and Liang (2005) model how a partnership's profit-sharing rule shapes partners' incentives to monitor one another, which helps explain why many professional firms combine fixed salaries with a residual share rather than splitting everything equally.
References
Huddart, S., & Liang, P. J. (2005). Profit sharing and monitoring in partnerships. Journal of Accounting and Economics, 40(1-3), 153-187. https://doi.org/10.1016/j.jacceco.2005.04.008
Jeter, D. C., & Chaney, P. K. (2011). Advanced accounting (5th ed.). John Wiley & Sons.
National Conference of Commissioners on Uniform State Laws. (1997). Uniform Partnership Act (1997).
What the ACC 6020 Module 9 instructions ask for
The ninth and last ACC-6020 written assignment covers Module 9, accounting for partnerships, within the 50 percent of the grade the written assignments share. Expect to record formation with cash and noncash contributions, allocate income or loss under agreements with salaries, interest on capital and residual ratios, including cases where profit is not enough to cover salaries and interest, admit new partners by purchase from existing partners or by investment using the bonus and goodwill methods, record withdrawals and prepare liquidation schedules. This page's figures are composites; it is set in an invented engineering firm, and your mentor's problems will give their own agreements and balances. Some versions add a partner's withdrawal or the liquidation of the firm.
How this ACC 6020 Module 9 example is built
The introduction explains how partnership equity works and what governs profit sharing. A formation table records each partner's contribution at fair value, net of the liability assumed. The income allocation appears in a table with salaries, interest and the residual split, followed by an explanation that these are allocations and a note on what happens when profit falls short. The admission problem works both methods in separate tables and explains when each is appropriate. A short liquidation note sets out the order of payments and the treatment of a capital deficiency, and the closing paragraph explains why the agreement governs the accounting.
Where the marks sit in the ACC 6020 Module 9 rubric
The partnership set closes the nine written assignments that decide half the grade. On partnership problems, mentors check that noncash contributions are recorded at fair value net of liabilities, that income allocations follow the agreement in order, salaries, interest, then remainder, that negative remainders are shared correctly, that admission computations under both methods are right and that liquidation pays creditors before partners. Explanations of why salaries and interest are not expenses, and why the bonus method is preferred, show understanding beyond the arithmetic. A capital account schedule for each partner that carries balances from formation through the admission shows full command of the topic. A final capital balance for every partner shows the allocation was complete.
ACC 6020 Module 9 help from the desk
The most frequent mistakes are recording a contributed asset at the partner's book value, treating partner salaries as expenses that reduce profit, and forgetting that a remainder can be negative and must still be shared. Follow the agreement in its stated order and check that the allocations sum to profit. In admission problems, compute total capital after admission and the new partner's percentage first, then decide whether a bonus or goodwill arises and to whom. Allocate in the order the agreement sets out, salaries, then interest, then the ratio, even when the remainder is negative. A free first sample of your own ACC-6020 Module 9 problems is available on request.
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ACC 6020 Module 9 questions, answered
Where can I find a free ACC 6020 Module 9 sample paper?
The engineering partnership assignment is printed above: formation at fair value, a profit allocation with salaries, interest and a residual ratio, and a new partner admitted by the bonus and goodwill methods.
How are noncash contributions to a partnership recorded?
At fair value on the date contributed, less any liabilities the partnership assumes, credited to the contributing partner's capital.
Are partner salaries expenses of the partnership?
No. In partnership income allocation they are a device for dividing profit among partners, not expenses that reduce net income.
What is the bonus method of admitting a partner?
Total capital equals assets contributed, and the difference between the new partner's capital credit and investment is transferred to or from existing partners' capital.
In what order are payments made when a partnership liquidates?
Outside creditors first, then any partner loans, then partners according to their capital balances after sharing gains and losses on sale.