Reference no: EM133069089

Question - Razul and Amy decided to start a partnership called SA Consulting on January 1, 2020. Each of them contributed a number of items to the partnership, which are listed below. All tangible assets are listed at their market value.

Razul		Amy
Cash	$42,100	Cash	$65,200
Equipment	157,900	Furniture	78,200
Bank Loan	88,000	Accounts Payable	26,800

On March 1, Razul and Amy added a new partner to the business, Sheila. Sheila will contribute $99,200 and receive a 31% share of the business. Use the capital balances from January 1 to determine any bonuses. Assume the existing partners will split any bonus evenly.

During the year, Razul and Amy withdrew $16,800 and $14,900 respectively and the business reported a net income of $377,400. Their partnership agreement provided for sharing of net income (loss) on the following basis:

1. Salary of $44,200 is allocated to Razul, $41,300 to Amy, and $34,500 to Sheila.

2. Interest is allocated at 6% of each partner's opening capital balance.

3. Remainder is shared where Razul gets 35%, Amy gets 33%, and Sheila gets 32%.

Required -

a) Prepare the journal entries to record the contributions of each partner to start the partnership.

b) Prepare a schedule showing the changes in capital and ending capital balances after the admission of Sheila.

c) Prepare the journal entry to record the admission of the new partner on March 1.

d) Prepare the journal entry to record the partner withdrawals of cash.

e) Prepare a schedule showing the allocation of the net income to the partners.

f) Prepare the journal entries to record the distribution of net income and the closing of the withdrawals accounts. Assume revenues and expenses have been closed to the income summary account.

g) After divding the income for the year, all parties agreed to liquidate the partnership. The values of the assets and liabilities are shown below. The furniture is sold for $69,840 and all other assets are sold at their given values. Any gains or losses from liquidation are split evenly among all partners.

Cash $447,750

Accounts Receivable 82,000

Net Equipment 205,270

Net Furniture 93,840

Accounts Payable 32,160

Bank Loan 123,200

Prepare the journal entries to sell the assets, distribute any gains or losses to the partners, pay the liabilities and distribute the cash to the partners.