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:

1. 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.

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

**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)

Additional information

t. Jearnal Estries 101/07 Frank's Capital Mike's Capital Loan Payable Wilson's Capital B. Journal Entries 12310 Frank's Capital Wilson's Capital Beg. Copital Intcrest Crodited Profit Distnibuted Eading Balance New Combined Capital L/01/08 Frank's Nick's Cagital Nick's Shar 200,000 51,000 OLOLIS Frank's Capital Mikes Capital Wilson's Capital Nick's Capital