Question

Exercise 15-1 John, Jeff, and Jane decided to engage in a real estate venture as a partnership. John invested $106,700 cash and Jeff provided office equipment that is carried on his books at $84,000. The partners agree that the equipment has a fair value of $104,900. There is a $29,800 note payable remaining on the equipment to be assumed by the partnership. Although Jane has no physical assets to invest in the partnership, both John and Jeff believe that her experience as a real estate appraiser is a valuable skill needed by the partnership and is a basis for granting her a capital interest in the partnership. Assuming that each partner is to receive an equal capital interest in the partnership,

(a) Your answer is partially correct. Try again. Record the partnership formation under the bonus method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Help please!!

Answer 1

Ans:

A). Bonus Method:

Bonus capital is determined as follows

Capital contributed by JOHN                   106,700

Capital contributed by JEFF 75,100 ( 104900 - 29,800)

                                       TOTAL 181,800

Capital required for each partner      181800/3     = 60,600

excess for John               106,700 - 60600 = 46,100

excess for jeff 75,100-60600 = 14,500

Total Excess = 60,600

but shared equally by john and jeff for contributing to jane.

S.no	Account title and explanation	Debit($)	Credit($)
1.	Cash	106,700
	John Capital		106,700
	(being cash brought in by john as share of capital)
2.	Equipment	104,900
	Jeff capital		75,100
	Notes payable		29,800
	(being assets and liabilities brought into business by jeff)
3.	Jeff capital	30,300
	John Capital	30,300
	Jane Capital		60,600
	(BEING bonus capital shared equally)