The net assets of the partnership are $4,000.00 less than the capital stock of the new company. No money is to be invested to cover this discrepancy, so it will be necessary to account for it on the books by opening a fictitious asset account under some such name as goodwill. Having made this provision, the books of the new company are opened by the following entries:
These entries serve to get the capital stock, also the assets and liabilities of the partnership properly recorded on the books of the new company.
STOCK DONATED TO EMPLOYES
40. A partnership composed of Benson, Black, and Mabley is conducting a retail hardware business. They desire to give their bookkeeper (Parker) an interest in the business. The firm has the following assets and liabilities:
| Assets | ||
| Cash | $3,000.00 | |
| Accounts receivable | 2,000.00 | |
| Merchandise | 15,000.00 | |
| Total assets | $20,000.00 | |
| Liabilities | ||
| Accounts payable | 2,000.00 | |
| Benson capital | 6,000.00 | |
| Black capital | 6,000.00 | |
| Mabley capital | 6,000.00 | |
| Total liabilities | 20,000.00 | |
They incorporate the Benson Company with a capitalization of $40,000.00 divided into 400 shares of $100.00 each. Benson, Black, and Mabley each subscribe for 100 shares, and 20 shares are presented to Parker. The balance of the stock is to remain unsubscribed until such time as it is decided to accept further subscriptions. The business of the partnership is to be accepted by the company in payment of subscriptions which have been made, and which are for 320 shares or $32,000.00. The net assets of the partnership being $18,000.00, goodwill must represent the balance of $14,000.00. The entries on the books of the partnership follow—
| The Benson Co. | $20,000.00 | |
| Cash | $3,000.00 | |
| Accounts receivable | 2,000.00 | |
| Merchandise inv. | 15,000.00 | |
| ———— | ||
| Accounts payable | 2,000.00 | |
| Benson | 6,000.00 | |
| Black | 6,000.00 | |
| Mabley | 6,000.00 | |
| The Benson Co. | 20,000.00 |
41. On Books of the Benson Co. The entries on the books of the new company are the same as in previous illustrations, the stock donated to Parker having been a gift from the partnership and the amount included in the goodwill.