Chapter 15, Problem 15.16.4P

To determine

Accounting for the formation of partnership:At the formation of partnership, all the partners contributes agreed value of cash and noncash assets, it is necessary to assign a proper value to the noncash assets and liabilities contributed by partners. The partnership must clearly distinguish between capital contributions and loans made to the partnership by individual partners.

The individual partners must agree to the percentage of equity that each will have in the partnership’s net assets. Generally, the capital balance is determined by proportionate share of each partner’s capital contribution.

To choose:The correct answer to determine amount to be recorded as capital for W and M at the partnership formation.