1.

Solutions:
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