Brenda, Baxter and Ben are independent website developers who have been trading in active opposition to one another for some years. They decide to form a partnership Trible B Web Developers as from January 1 2022. The agreement set out the following basic arrangements.
1. Brenda is to contribute $16,000 in cash, computers valued at $20,000 and debtors at $24,000.
2. Baxter is to contribute a lease of premises as used by him such as a lease to be regarded as having a capital value of $25,000 computers of $20,000 and $12,000 in cash.
3. Ben to contribute computers valued at $27,000 and to act as managing director at a salary of $40,000 per year.
4. Interest for the period is to be allowed partners at the rate of 8% per annum on beginning capital.
5. Profits and losses are to be shared in the same proportions as capital contributed.
Required
A. Prepare the General Journal Entries to record the Investments made by each of the Partners.
B. Assuming in the first year that the partnership makes a profit of $130,000, show how this profit would be allocated to partners.