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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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[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. 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

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