The Xero and Yoga Partnership was organized and began operations on March 1, 2020. On that date, Xero invested 600,000 and Yoga invested land and building with current fair value of 320,000 and 400,000, respectively. Yoga also invested 240,000 in the partnership on November 1, 2020 because of shortage of working capital. The partnership contract includes the following income-sharing plan.

Xero Yoga

Annual salary 72,000 96,000

Annual interest on average capital 10% 10%

Remainder 50% 50%



The annual salary may be withdrawn by each partner in 12 monthly installments. During the year ended, February 28, 2021, the Xero and Yoga Partnership had net sales of 2,000,000, cost of goods sold of 1,120,000 and operating expenses of 400,000 (excluding partners' salaries and interest to partners' average capital balances). Each partner had monthly cash drawings in accordance with the partnership contract. The capital balances of Xero and Yoga on February 28, 2021 are?



2. A and B decided to combine their business and form a partnership. Below are their Statement of Financial Positions before any adjustments:

A B

Cash 48,400 98,360

Accounts receivable 1,031,960 2,498,716

Inventories 528,160 1,144,448

Property, Plant & Equipment (net) 2,613,380 1,852,224

Other assets 8,800 15,840

Total Assets 4,230,700 5,609,588



Accounts payable 787,336 1,072,060

Notes payable 1,000,000

Mortgage payable 1,440,000

A, Capital 2,443,364

B, Capital 3,097,528

Total Liabilities & Equity 4,230,700 5,609,588



The partners agreed that the property, plant and equipment of A is under depreciated by 80,000 and that of B is over depreciated by 200,000. Accounts receivable of 108,000 in A's book and 140,000 in B's book are uncollectible. The partnership decided to assume the mortgage liability of B. The partnership agreement provides for a profit and loss ratio and capital interest of 60% to A and 40% to B. B is willing to invest or withdraw cash from the partnership to comply with the agreement. Compute for the capital balances of A and B right after the formation.