Dabney and Evers are both professional plumbers, and they form a partnership, D&E Plumbing, on June 1,

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Question:

Dabney and Evers are both professional plumbers, and they form a partnership, D&E Plumbing, on June 1, 2017. They contribute to the partnership as follows:

Dabney – Cash: $150,000

Evers – Land with a book value of $25,000 and a fair value of $30,000. On the land is a building that contains an office and workshop. The building has a book value of $125,000, but a fair value of 200,000.

Assume that the partners agree to begin with equal capital balances and no goodwill is recognized. Together they write articles of partnership which allocate profits and losses as follows:

Each partner receives interest of 10% of their beginning capital balances.
Dabney receives a compensation allowance of $2,000 per month.
Remaining profits and losses are split 70:30 to Evers and Dabney, respectively.

During 2017, D&E Plumbing’s net income was $64,000.

On January 1, 2018, Dabney and Evers invited Franklin to join the partnership. Franklin has skills and experience that can help the partnership reach the commercial construction market. Because of those important skills Franklin brings to the partnership, he can contribute $50,000 in exchange for a 40% interest. The bonus approach is used to record his contribution, which he paid directly into the partnership. The partners amend the articles of partnership as follows:

Each partner receives interest of 10% of their beginning capital balances.
Dabney receives a compensation allowance of $2,000 per month. Franklin receives a $2,500 per month compensation allowance and an annual draw of $10,000.
Remaining profits and losses are split as follows:

Evers 42%
Dabney 18%
Franklin 40%

Net income for 2018 is $160,000.

Required -

Prepare a spreadsheet that shows the beginning capital balances, allocation of net income and ending capital balances for both 2017 and 2018 for all three partners. Round all final calculations to the nearest cent. Make sure your spreadsheet is professional looking with proper labels and headings and that your numbers are appropriately formatted.