SOLUTIONS:

Requirement (a):
A B Partnership
Cash 200,000 - 200,000
Accounts receivable (100K - 40K) 60,000 - 60,000
Inventory 160,000 - 160,000
Land
Building (240K - 50K)
Total 420,000 290,000 710,000

Note payable, net (120K - 30K) 90,000 90,000

Mortgage payable – land 20,000 20,000
A, capital 330,000 330,000
B, capital 270,000 270,000
Total 420,000 290,000 710,000

Requirement (b):
Using first A’s capital, let us determine if B’s capital contribution has any
deficiency. A, capital 330,000
Divide by: Profit (loss) sharing
60%
ratio of A
Total 550,000

Multiply by: B's profit (loss)

40%
sharing ratio
Minimum capital required of B
220,000 B's
capital
270,000
Deficiency on B's capital
-
contribution

It can be shown above that B’s contribution has no deficiency.

Now using B’s capital, let us determine if A’s capital contribution has any
deficiency. B, capital 270,000
Divide by: Profit (loss) sharing
40%
ratio of A
Total 675,000

Multiply by: A's profit

60%
(loss) sharing ratio
Minimum capital required of A 405,000
330,000
Deficiency on A's 75,000
capital distribution