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Question -
February 1 - Brady and Manning decide to start up a partnership. Brady brings in $10 000 cash and equipment costing $60 000, with $17 000 in the accumulated depreciation account. The fair market value of the equipment is $37 000. Manning brings $54 000 in cash. They agree to an income ratio of 5:4.
December 31 - The business records a net income of $24 000, and Brady has a debit balance of $16 000 in his drawings account.
a) Record the journal entry to establish the partnership.
b) Record the entry to allocate the net income to the partners' capital accounts.
c) Record a Statement of Partners' Equity for 2014.
The sausage system will save the firm $256,800 per year in pretax operating costs, and the system requires an initial investment in net working capital of $59,920.
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