William, Casey, and Samantha are forming a partnership. Below is a table outlini

Question

William, Casey, and Samantha are forming a partnership. Below is a table outlining the contributions of each partner.

                                                            William             Casey           Samantha

Cash                                                    $ 15,000         $20,000           $ 10,000

Inventory                                            100,000         60,000               80,000

Plant Assets                                        250,000                                 160,000

Liabilities Assumed by Partnership    130,000                                     90,000

In addition, Casey brings significant experience needed to run the business. It is agreed that partners will receive capital allocations equal to the market value of the net assets contributed and that Casey will receive additional capital of $75,000 and the bonus method will be applied. Two-thirds of the bonus is to come from William and one-third from Samantha. Record the journal entry for the creation of the partnership.

Explanation / Answer

Account Title & explanations debit credit Cash $     15,000 Inventory $ 1,00,000 Plant Assets $ 2,50,000 Liabilities $ 1,30,000 William Capital $ 2,35,000 (Net assets contributed by William Recorded) Cash $     10,000 Inventory $     80,000 Plant Assets $ 1,60,000 Liabilities $     90,000 Samantha Capital $ 1,60,000 (Net assets contributed by Samantha Recorded) Cash $     20,000 Inventory $     60,000 Casey Capital $     80,000 (Net assets contributed by Casey Recorded) William Capital $     50,000 Samantha Capital $     25,000 Casey Capital $     75,000 (Bonus of $75000 given to Casey adjusted through capital accounts of the partners)

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