On June 7, 2020, Cheng and Morales, two recent graduates of Upper State University, formed a computer consulting firm Cheng contributed an extensive, up to date computer installation, valued at $100,000 This equipment had been financed by a bank loan the partnership assumed the current balance of $25,000 Cheng also invested $5,000 cash Morales had recently inherited a small office building, valued at $150,000 and encumbered by a mortgage debt of $35,000 Morales transferred both the building and the debt to the partnership Chengs extensive computer skills coupled with Morales sales and customer service skills suggest a profitable future for the firm They agreed to share profits in the ratio of 40 percent for Cheng and 60 percent for Morales, in part because of Morales larger investment Required Compute the balance in each partners capital account on June 7, 2020, and record the partnership formation entry if the NOTE If the additional debit journal entry is not needed, select No entry as your answer and leave the Debit Credit numerical answers blank (zero) a Partners do not specify any capital relationship Description Debit Credit Cash Answer Answer Computer equipment Answer Answer Building Answer Answer AnswerGoodwillNo entry Answer Answer Loan payable Answer Answer Mortgage payable Answer Answer Capital, Cheng Answer Answer Capital, Morales Answer Answer b Partners agree that each is to have a 50 percent interest in partnership capital, and they specify the bonus approach to recording the formation Description Debit Credit Cash Answer Answer Computer equipment Answer Answer Building Answer Answer AnswerGoodwillNo entry Answer Answer Loan payable Answer Answer Mortgage payable Answer Answer Capital, Cheng Answer Answer Capital, Morales Answer Answer c Partners agree that each is to have a 50 percent interest in partnership capital, and they specify the goodwill approach to recording the formation Description Debit Credit Cash Answer Answer Computer equipment Answer Answer Building Answer Answer AnswerGoodwillNo entry Answer Answer Loan payable Answer Answer Mortgage payable Answer Answer Capital, Cheng Answer Answer Capital, Morales Answer Answer

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Posted on Sep 12, 2024

On June 7, 2020, Cheng and Morales, two recent graduates of Upper State University, formed a computer consulting firm. Cheng contributed an extensive, up-to-date computer

On June 7, 2020, Cheng and Morales, two recent graduates of Upper State University, formed a computer consulting firm. Cheng contributed an extensive, up-to-date computer installation, valued at $100,000. This equipment had been financed by a bank loan; the partnership assumed the current balance of $25,000. Cheng also invested $5,000 cash. Morales had recently inherited a small office building, valued at $150,000 and encumbered by a mortgage debt of $35,000. Morales transferred both the building and the debt to the partnership. Chengs extensive computer skills coupled with Morales sales and customer service skills suggest a profitable future for the firm. They agreed to share profits in the ratio of 40 percent for Cheng and 60 percent for Morales, in part because of Morales larger investment.

Required

Compute the balance in each partners capital account on June 7, 2020, and record the partnership formation entry if the:

NOTE: If the additional debit journal entry is not needed, select "No entry" as your answer and leave the Debit/Credit numerical answers blank (zero).

a. Partners do not specify any capital relationship.

Description	Debit	Credit
Cash	Answer	Answer
Computer equipment	Answer	Answer
Building	Answer	Answer
AnswerGoodwillNo entry	Answer	Answer
Loan payable	Answer	Answer
Mortgage payable	Answer	Answer
Capital, Cheng	Answer	Answer
Capital, Morales	Answer	Answer

b. Partners agree that each is to have a 50 percent interest in partnership capital, and they specify the bonus approach to recording the formation.

Description	Debit	Credit
Cash	Answer	Answer
Computer equipment	Answer	Answer
Building	Answer	Answer
AnswerGoodwillNo entry	Answer	Answer
Loan payable	Answer	Answer
Mortgage payable	Answer	Answer
Capital, Cheng	Answer	Answer
Capital, Morales	Answer	Answer

c. Partners agree that each is to have a 50 percent interest in partnership capital, and they specify the goodwill approach to recording the formation.

Description	Debit	Credit
Cash	Answer	Answer
Computer equipment	Answer	Answer
Building	Answer	Answer
AnswerGoodwillNo entry	Answer	Answer
Loan payable	Answer	Answer
Mortgage payable	Answer	Answer
Capital, Cheng	Answer	Answer
Capital, Morales	Answer	Answer