As Con's business is continuing to expand he is considering on getting some help in running the
Question:
As Con's business is continuing to expand he is considering on getting some help in running the business. One of Con's option is to take on some partners which would not only give him some more help in managing the business but also add some capital to assist with the expansion plans.
Con has two cousins, Dee Struckshen and Anne Eyealashon who are keen to make a partnership. Dee has $40,000 in savings that she is willing to contribute for a 25% share while Anne has $10,000 cash and a $30,000 vehicle they will contribute also for a 25% share. Con has been able to quickly do up a balance sheet on the computer software he uses and it shows his current capital balance as being $110,000.
As part of the discussions on becoming partners, Dee, Anne and Con have agreed to share any profits or losses equally amongst the three of them. To compensate Con for his larger capital contribution he will receive an interest payment of 10% of his capital balance (as long as it remains above $100,000) as well as salary of $20,000.
Con is extremely appreciative of the work you have done with him and was mentioning how great you are to Bill when he was buying the group of assets from him. Bill has contacted you to help him close down his business. Bill's business Create or Refresh was a partnership he had been running with his good friend René Vate. Bill and René have provided you with the following information about the dissolution of their business.
Assets
Cash 3,500
Inventory 7,500
Demolition Tools 21,000
Equipment Trailer 8,000
Motor Vehicles 49,000
Land 140,000
Goodwill 10,000
239,000
Liabilities
Accounts Payable 6,950
Accrued Expenses 2,800
Loans 93,000
102,750
Equity
Bill 66,250
René 70,000
136,250
239,000
In addition to the $90,000 cash Con paid to Bill, René was able sell off the remaining assets for $134,500 cash. Bill and René have always shared any profits and losses equally (50% each).
Question:
Auditing and Assurance services an integrated approach
ISBN: 978-0133125689
15th edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley