Reference no: EM132808966

A and B formed a partnership. The following are their contributions:

A B

Cash 200,000 -

Accounts receivable 150,000 -

Inventory 100,000 -

Land 500,000

Building 620,000

Total 450,000 1,120,000

Note payable 220,000

A, capital 230,000

B, capital 1,120,000

Total 450,000 1,120,000

Additional information:

• The accounts receivable has a recoverable amount of ?120,000.
• The inventory has an estimated selling price of ?110,000 and estimated costs to sell of ?20,000.
• The land has a fair value of ?500,000 an unpaid mortgage of ?120,000. The partners agreed that B shall settle the mortgage using his personal funds.
• The building is over-depreciated by ?30,000.
• The building also has an unpaid mortgage amounting to ?550,000. The partners agreed that the partnership shall assume repayment of the mortgage.
• The note payable has a fair value of ?210,000.
• A and B shall share in profits and losses 40% and 60%, respectively.

Problem 1: How much are the adjusted capital balances of A and B, respectively?