Question

Shawn invests $125,000 cash and $70,000 Equipment to form partnership of NH CableSource. The Equipment has a notes payable of $50,000. Dan invests $80,000 cash to Nh CableSource. Show the entries to form the partnership. The allocation agreement for income is salary Shawn $35,000, Dan $25,000, annual interest allowance of %15 percent of partner beginning capital balance and the rest of income or loss divided equally. During the year Shawn withdraws $15,000 cash and Dan withdraws $10,000 cash. Net Income for the year is $125,000. Calculate the ending capital balances for Shawn and Dan.

Answer 1

Show the entries to form the partnership

Sr no	Particular	Dr	Cr
1	Cash	$ 125,000
	Equipment	$    70,000
	To note payable		$    50,000
	To Shawn capital (1.25+0.7-0.5)		$ 145,000
	(asset and liability brought in b shawn is recorded in partnership account)
2	Cash	$    80,000
	To Dan capital		$    80,000
	(cash brought in by dan in recorded in partnership account)

Calculate the ending capital balances for Shawn and Dan.

Capital account in books of NH CableSource
	Shawan	Den
Capital brought in by partners
Cash	$ 125,000	$    80,000
Equipement	$    70,000	0
Less
Note payable	$    50,000	0
Opening balance	$ 145,000	$    80,000
Add: Annual interest @15% on opening balance (1.45 ; 0.8 x15%)	$    21,750	$    12,000
Add: net income (125000; 50%;50%)	62500	62500
Less
Withdrawal	15000	10000
Closing balance	$ 214,250	$ 144,500
(1.45+0.21750+0.62500-0.15000)
(0.8+0.12+0.62500-0.10000)

** payament of salary won't be credited into capital accounts but will be directly paid to them in cash.