Ping and Juno decide to form a partnership on 30 June 2020. They secure the services of Timothy Legal to draw up their partnership agreement as follows. 1. Ping is to contribute: - his car, the fair value of which is $32,000 - property with a book value of $120,000 but revalued to $150,000 - a mortgage of $80,000; this was secured over the property and the partnership has agreed to assume this liability. 2. June is to contribute: - cash totaling $25,000 - office equipment with a market value of $45,000 It is also agreed that ping will act as a manager with an annual salary of $65,000 to be allocated at the end of each year. Profits or losses will be divided between Ping and Juno in proportions 2/3 and 1/3 respectively. Gross profit for the year ended 30 June 2021 is $165,000, with operating expenses of $105,000. Ping withdrew $19,500 and Juno withdrew $4,000 during the year. Questions: a. Prepare the statement of the financial position of the partnership on its formation (30 June 2020). b. Calculate each partner's share of profit for the year ended 30 June 2021
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
[Study Case]
Ping and Juno decide to form a partnership on 30 June 2020. They secure the services of Timothy Legal to draw up their partnership agreement as follows.
1. Ping is to contribute:
- his car, the fair value of which is $32,000
- property with a book value of $120,000 but revalued to $150,000
- a mortgage of $80,000; this was secured over the property and the partnership has agreed to assume this liability.
2. June is to contribute:
- cash totaling $25,000
- office equipment with a market value of $45,000
It is also agreed that ping will act as a manager with an annual salary of $65,000 to be allocated at the end of each year.
Gross profit for the year ended 30 June 2021 is $165,000, with operating expenses of $105,000. Ping withdrew $19,500 and Juno withdrew $4,000 during the year.
Questions:
a. Prepare the
b. Calculate each partner's share of profit for the year ended 30 June 2021
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