Two sole proprietors, L and M, agreed to form a partnership on January 1, 20X9. The trial balance for each proprietorship is shown below as of January 1, 20X9.

The LM partnership will take over the assets and assume the liabilities of the proprietors as of January 1, 20X9. Required:

a- If the Partnership Agreement states that the Partnerships Capital Percentage will be based on their FV Net Asset Contribution, what Percentage of the Total Capital will be allocated to M?

b- If the partners agreed on a 80%/20% capital ratio with L owning 20%, what is the true up payment required?

c- Would L be required to pay or received the true up payment?

L M On Books Fair On Books Fair of L Values of M Cash Accounts Receivable (net) Merchandise Inventory Buildings (net) Furniture and Fixtures (net) Accounts Payable Mortgage Payable L, Capital M, Capital $40,000 60,000 100,000 280,000 60,000 110,000 200,000 230,000 $40,000 52,000 94,000 320,000 64,000 110,000 200,000 $30,000 70,000 100,000 250,000 40,000 80,000 150,000 Values $30,000 56,000 114,000 280,000 44,000 80,000 150,000 260,000