Two people are starting a small IT firm. They come to you for advice on how to form a partnership. They have listed 2 scenarios and are asking you how to make journal entries for each one of the following transactions:

1. Two partners, A and B, start a partnership.

• Partner A's investment is the following:
• Cash: $20,000
• Inventory: $30,000
• Accounts payable: $50,000
• Computer equipment: $40,000
• Accumulated depreciation: $20,000
• Partner B's investment is the following:
• Cash: $10,000
• Computer software: $20,000

1. Two partners, Small and Big, form a partnership in which Small invested $40,000 and Big invested $60,000 for a total capital of $100,000. But Small devotes more time to the business and earns more from the firm. They have agreed to share the profits as follows:

• The first $20,000 is allocated on the partner's capital balances.
• The next $30,000 is allocated based on service: Small gets $20,000, and Big gets $10,000.
• Any remaining profits are allocated equally.
• The partnership's net income is $100,000.