Partnership
1. A partnership on equal terms between A and B is dissolved July 1, 1917, the books on that date showing the following:
A’s capital paid in was $16,000, and his drawings were $3,500. B’s capital paid in was $2,000, and his drawings were $1,500. Goods purchased $50,000; sales $40,000; business expenses $1,800. A loss of $1,600 was made on a $5,000 consignment of goods to Liverpool. In the settlement A agrees to pay B an old debt of $3,500. Prepare requisite accounts, and show final balance payable by one partner to the other.
2. A and B are partners carrying on a business in Winnipeg. On January 1, 1918, after adding profits for the past half-year, A’s capital amounted to $150,000, and B’s to $100,000. On that date they take into partnership C, upon the following terms: viz.: he is to bring in capital amounting to $25,000, and each partner is to be credited with interest on his capital at 6% per annum. All profits (after debiting interest) up to $25,000 are to be shared by A and B exclusively in proportion to the amounts of their capital at January 1, 1918. All profits in excess of $25,000 are to be shared equally by the three partners. Accounts are to be prepared and profits and interest credited half-yearly. C is to be credited with a salary of $5,000 per annum. On June 30, 1918, the profits divisible after debiting C’s salary, which he has drawn, but before charging interest on partners’ capital, amounted to $75,000. The partners’ withdrawals which are not chargeable with interest were: A $12,500, B $10,000, and C $3,750. Draw up partners’ separate accounts as they should stand on July 1, 1918.
Assume that instead of a profit, a loss of $75,000 had occurred. How would you have treated it in the accounts in the absence of any direct provision in the partnership agreement relative to losses?
3. A, B, and C were partners in business for several years. A died December 31, 1917. The articles of copartnership provided that on any change in the firm the good-will should be taken into account and its value divided—one-half to A and one-quarter each to B and C. The balance sheet at the date of A’s death was as follows:
| Assets | ||
| Cash | $ 1,500.00 | |
| Merchandise on Hand | 12,000.00 | |
| Sundry Notes and Accounts Receivable | 15,000.00 | $28,500.00 |
| Liabilities | ||
| Sundry Accounts Payable | $ 8,500.00 | |
| A’s Net Investment | 10,000.00 | |
| B’s Net Investment | 5,000.00 | |
| C’s Net Investment | 5,000.00 | $28,500.00 |
In January, 1918, B and C arranged with D to come into the firm with $5,000. The good-will is, by agreement, to be valued at $3,000. The new firm, consisting of B, C, and D, takes over the business and good-will in equal shares, subject to an allowance of 2½% on the notes and accounts receivable. It pays the estate of A $5,000, with the understanding that the balance due A’s estate shall remain as a loan at the rate of 5% interest.
Prepare the balance sheet and the capital accounts of B, C, and D as they should appear at the beginning of the new business, writing off the purchase of good-will in equal proportions to the amount of capital invested.