Rick, Mary, and Joe formed a partnership on January 1, 2017, with investments of $100,000, $150,000, and $200,000, respectively. For the income split, they agreed to (1) 10% interest on the initial principal balance each year, (2) an annual compensation of $10,000 for Mary, and (3) share the rest of the income or loss in a proportion 20% for Rick and 40% each for Mary and Joe. Net income was $150,000 in 2017 and $180,000 in 2018.

Each partner withdrew $1,000 for personal use every month during 2017 and 2018.

1. Please prepare the Statement of Capital Balances of the Partners for 2017 and 2018. 2. The capital balances of the DEF Company are the following:

Danielson Eklund Forsberg Total

$180,000 95,000 150,000 $425,000

The partners' revenue sharing ratio is: Danielson, 25%; Eklund, 45%; Forsberg, 30%. Assume that the company's identifiable net assets are recorded at amounts that approximate fair value.

1. Assume Gustafson joins the partnership by contributing $125,000 to the partnership for a 20% equity interest in the partnership.

2. Now suppose Gustafson paid $90,000 for a 20% equity interest.

3.Each case is independent, use the Bonus method and the Goodwill method to analyze the problem. Prepare the Capital Balance Statement of the Partners, as well as the related journals prepared for the partnership.

Answer rating: 100% (QA)

PART 1 Statement of Capital Balances of the Partners for 2017 and 2018 To prepare the Statement of Capital Balances we need to calculate the following for each partner 1 Initial capital balance 2 Shar... View the full answer