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

JOURNAL ENTRY
S.No.	Account Title	Debit	Credit
	Cash	$1,25,000
	Equipment	$70,000
	Note Payable		$50,000
	Shawn Capital		$1,45,000
	(Being Assets and Liability brought into firm)
	Cash	$80,000
	Dan Capital		$80,000
	(Being Assets and Liability brought into firm)

CAPITAL ACCOUNT
	Particulars	Shawn	Dan
	Cash	$1,25,000	$80,000
Add	Equipment	$70,000	-
Less	Note Payable	$50,000	-
	Opening Capital	$ 1,45,000	$80,000
Add	Annual Interest @ 15% on Opening Capital	$21,750	$12,000
	(Shawn : $ 1,45,000*15%)
	(Dan : $ 80,000*15%)
Add	Salary	$35,000	$25,000
Add	Profit & Loss	$62,500	$62,500
	( Equally)
Less	Withdrawal	$15,000	$10,000
	Closing Capital	$2,49,250	$1,69,500