Requirements:

Valuation of Contribution of partners

1. Provide the journal entry to record the partner’s contribution.

Mr. Sun Ms. Moon Partnership

Cash 400,000 - 400,000
Accounts Receivable (250,000 x .80) 200,000 - 200,000
Land (at fair value) 1,000,000 1,000,000
Equipment (180,000 – 30,000) 150,000 150,000
Total 600,000 1,150,000 1,750,000
Mortgage Payable - Land -250,000 -250,000
Adjusted capital balances 600,000 900,000 1,500,000

Cash 400,000
Accounts receivable 200,000
Land 1,000,000
Equipment 150,000
Mortgage payable 250,000
Sun, Capital 600,000
Moon, Capital 900,000

2. Which partner should make an additional contribution and by how much? Mr. Sun additional
contribution: Mr. Sun shall contribute additional cash of 300,000

Mr. Sun Ms. Moon Partnership

Cash 400,000 - 400,000
Accounts Receivable 200,000 - 200,000
(250,000 x .80)
Land (at fair value) 1,000,000 1,000,000
Equipment (180,000 – 150,000 150,000
30,000)
Total 600,000 1,150,000 1,750,000
Mortgage Payable - Land -250,000 -250,000
Adjusted capital balances 600,000 900,000 1,500,000
Mr. Sun’s capital 600,000 600,000 1,200,000
Balance - 300,000
Mr. Sun’s capital 900,000 900,000 1,800,000
Balance (300,000) 0

Bonus on initial investment

3. Provide the journal entry to record the partner’s contribution.

Mr. Sun Ms. Moon Partnership

Cash 400,000 - 400,000
Accounts Receivable 200,000 - 200,000
(250,000 x .80)
Land (at fair value) 1,000,000 1,000,000
Equipment (180,000 – 150,000 150,000
30,000)
Total 600,000 1,150,000 1,750,000
Mortgage Payable - Land -250,000 -250,000
Adjusted capital balances 600,000 900,000 1,500,000
Adjusted capital balances 750,000 750,000 1,500,000

Cash 400,000
Accounts receivable 200,000
Land 1,000,000
Equipment 150,000
Mortgage payable 250,000
Sun, Capital 750,000
Moon, Capital 750,000
Variation to bonus method – cash settlement between partners
Mr. Sun Ms. Moon Partnership
Cash 400,000 - 400,000
Accounts Receivable 200,000 - 200,000
(250,000 x .80)
Land (at fair value) 1,000,000 1,000,000
Equipment (180,000 – 150,000 150,000
30,000)
Total 600,000 1,150,000 1,750,000
Mortgage Payable - Land -250,000 -250,000
Adjusted capital balances 600,000 900,000 1,500,000
Adjusted capital balances 750,000 750,000 1,500,000
Receipt/Payment (150,000) 150,000

4. A Provide the compound journal entry to record the partner’s contribution.

Cash 400,000
Accounts receivable 200,000
Land 1,000,000
Equipment 150,000
Mortgage payable 250,000
Sun, Capital 750,000
Moon, Capital 750,000

4. B Provide the simple journal entry to record the partner’s contribution.

Cash 400,000
Accounts receivable 200,000
Sun, Capital 600,000
to record the contributions of Sun

Land 1,000,000
Equipment 150,000
Mortgage payable 250,000
Moon, Capital 900,000
to record the contributions of Moon

Moon, Capital 150,000

Sun, Capital 150,000
to equalize the capital balances of the partners

Variation to bonus method – additional investment/withdrawal

5. Which partner shall make an additional investment and which partner shall withdraw part of his/her
investment?

Mr. Sun Ms. Moon Partnership

Cash 400,000 - 400,000
Accounts Receivable 200,000 - 200,000
(250,000 x .80)
Land (at fair value) 1,000,000 1,000,000
 Equipment (180,000 – 150,000 150,000
30,000)
Total 600,000 1,150,000 1,750,000
Mortgage Payable - Land -250,000 -250,000
Adjusted capital balances 600,000 900,000 1,500,000
Adjusted capital balances 750,000 750,000 1,500,000
Receipt/Payment (150,000) 150,000

Mr. Sun shall invest an additional 150,000, while Ms. Moon shall withdraw 150,000.