a) Fox, George, and Hayes form a partnership on 1-1-20X1. Fox contributes cash of $40,000 and equipment with a book value to Fox of $8,000 and a fair market value of $10,000. George contributes cash of $25,000 and equipment with a book value to George of $30,000 and a fair market value of $25,000. Hayes contributes $5,000 of cash and equipment with a book value to Hayes of $15,000 and a fair market value of $20,000.

Prepare the entry for the admission of the partners to the new partnership.

b) Fox, George, and Hayes partnership agree states the following regarding the allocation of net income:

Interest on beginning of the year capital balances is 5 percent.

A bonus is to be allocated to George computed as 10 percent of income after the bonus and in excess of $50,000 (George’s name is important to the partnership – thus the bonus)

A salary of $40,000 is to be allocated to Fox (Fox is the only partner working in the partnership).

Any remaining income is to be allocated 20 percent to Fox, 60 percent to George, and 20 percent to Hayes.

Compute how much of the $90,000 of partnership income for year 20X1 is to be allocated to each partner.