Frank, Mike and Wilson decided to form a partnership. On 01/01/2007, the partnership was formed. Frank contributed cash in the amount of $ 40,000, Mike contributed in inventory with book value of $20,000 and fair market value of $30,000, Wilson contributed a piece land with book value of 30,000 and fair value of $50,000, note that the land is encumbered by a loan (due in 2020) of $20,000 that the partnership agrees to assume. Due to the different expertise and capital contribution, the partnership states that future profit/loss should be allocated in the following manner

**Each partner receives 2% interest of their beginning capital balance every year, note that if the partnership generates a loss, then no interest shall be paid; if the partnership fails to generate enough income to pay interest in full amount, then the income should be divided according to partners capital contribution.

**Frank, Mike and Wilson than claims, respectively, 30%, 30% and 40% of remaining of the profit/loss every year

** On 01/01/2008, seeing the good performance of the partnership, Nick wants to be part of the partnership, he agrees to pay 40,000 in exchange for 20% of the new partnership and Frank, Mike and Wilson all agreed.

** 2008 was a bad year for the partnership, the partnership lost $10,000.

f. What are the balances of capital accounts after year 2008 operation? please state the balances use bonus and goodwill method respectively (10 points)

12/31/2008 Wilson sensed the incoming of crisis and decided to quit, and the partnership agreed. The partnership has a fair value of 150,000 at 12/31/2008 and Wilson quit on that day

g. Use bonus and good will methods to record the transaction and calculate each partners capital balance after the transaction. (10 points)

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