What amounts should be recorded as capital

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Question: Roberts and Smith drafted a partnership agreement that lists the following

FV assets contributed at the partnership's formation:

Contributed by

Roberts Smith

Cash$80,000 $110,000

Inventory 50,000 55,000

Building 130,000 80,000

Furniture & Equipment 15,000 0

The building Smith contributed is subject to a mortgage of $35,000, which the partnership has assumed. The partnership agreement also specifies that profits and losses are to be distributed evenly.

a. What amounts should be recorded as capital for Roberts and Smith at the formation of the partnership without a true up for the 50/50 profit and loss allocation?

b. If the partners agreed on a 50%/50% capital ratio, what is the "true up" payment required by Smith?

Reference no: EM132765810

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