Gorman and Morton form a partnership on May 1, 2019. Gorman contributes cash of $62,000; Morton conveys title to the following properties to the partnership: Book Value Fair Value Equipment $ 21,000 $ 40,000 Licensing agreements 41,000 48,000 The partners agree to start their partnership with equal capital balances. No goodwill is to be recognized. According to the articles of partnership written by the partners, profits and losses are allocated based on the following formula: Gorman receives a compensation allowance of $1,000 per month. All remaining profits and losses are split 40:60 between Gorman and Morton, respectively. Each partner can make annual cash drawings of $6,000 beginning in 2020. Net income of $17,000 is earned by the business during 2019. Steele is invited to join the partnership on January 1, 2020. Because of her business reputation and financial expertise, she is given a 40 percent interest for $66,000 cash. The bonus approach is used to record this investment, made directly to the business. The articles of partnership are amended to give Steele a $3,000 compensation allowance per month and an annual cash drawing of $12,000. Remaining profits are now allocated: Gorman 12 % Morton 48 Steele 40 All drawings are
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