1. Able and Baker have agreed to form a partnership. Both of them already had proprietorships, and those assets were going to be combined to form the partnership. The fair value of Able and Baker's assets and liabilities are listed below. Able's Baker's Contribution Contribution Cash $ 5,000 $20,000 Inventory 5,000 40,000 Land 50,000 Building 30,000 Equipment 10,000 20,000 Liabilities assumed (10,000) Net assets $90,000 $80,000 contributed Assuming that Able and Baker have agreed to have equal equity balances, prepare the journal entry to record the partnership using A. The bonus method Cash Inventory Land Building Equipment Accounts Payable Able, Capital Baker, Capital B. The goodwill method $25,000 $45,000 $50,000 $30,000 $30,000 $10,000 $85,000 $85,000 Cash Inventory Land Building Equipment Intangible Asset (Goodwill) (90,000- 80,000) Accounts Payable Able, Capital Baker, Capital $25,000 $45,000 $50,000 $30,000 $30,000 $10,000 $10,000 $90,000 $90,000 2. Refer to Exercise 1 Part A. Able and Baker have made the following provision for the allocation of partnership income: Able Baker Percent of beginning equity balance 8% 10% Salary allowance $25,000 $15,000 Remainder 50% 50% A. In the first year of operation, the partnership earned $60,000. Complete the schedule below to allocate income Allocation of Partnership Income Able Baker Total Percent of equity balance | Salary allowance $25,000 $15,000 $40,000 Total before remainder Remainder Total B. Now assume that the partnership income was $20,000. Complete the schedule below Allocation of Partnership Income Able Baker Total Percent of equity balance Salary allowance Total before remainder Remainder Total