CHAPTER 12
Continuing Cookie Chronicle
(Note: This is a continuation of the Cookie Creations from Chapters 1 through 11.)
CC12 Natalie’s high school friend, Katy Peterson, has been operating a bakery for
approximately 18 months. Because Natalie has been so successful operating Cookie
Creations, Katy would like to have Natalie become her partner. Katy believes that
together they will create a thriving cookie-making business. Natalie is quite happy with
her current business set-up. Until now, she had not considered joining forces with
The Baker’s Nook
Cookie Creations
Cash
$ 1,500
$12,000
Accounts receivable
6,000
800
Allowance for doubtful accounts
(750)
0
Equipment
7,500
Notes payable (bank loan)
All assets would be transferred into the partnership. The partnership would assume all of
the liabilities of the two proprietorships. The bank loan (notes payable) is due February
17, 2018.
Additional information:
• Katy operates her business from leased premises. She has just signed a lease for 12
months. Monthly rent will be $1,000. Katy’s landlord has agreed to draw up a new
lease agreement that would be signed by both partners.
Natalie thinks that it may be a good idea to establish a partnership with Katy. She comes
to you with the following questions.
1. “Do I really need a formalized partnership agreement drawn up? What would be the
point of having one if Katy and I agree on all major decision? What type of
information should the partnership agreement contain?”
Instructions
(a) Answer Natalie’s questions.
(b) Assume that Natalie and Katy go ahead and form a partnership called Cookie