The Xero and Yoga Partnership was organized and began operations on March 1, 2020. On that date,
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Xero Yoga
Annual salary 72,000 96,000
Annual interest on average capital 10% 10%
Remainder 50% 50%
The annual salary may be withdrawn by each partner in 12 monthly installments. During the year ended, February 28, 2021, the Xero and Yoga Partnership had net sales of 2,000,000, cost of goods sold of 1,120,000 and operating expenses of 400,000 (excluding partners' salaries and interest to partners' average capital balances). Each partner had monthly cash drawings in accordance with the partnership contract. The capital balances of Xero and Yoga on February 28, 2021 are?
2. A and B decided to combine their business and form a partnership. Below are their Statement of Financial Positions before any adjustments:
A B
Cash 48,400 98,360
Accounts receivable 1,031,960 2,498,716
Inventories 528,160 1,144,448
Property, Plant & Equipment (net) 2,613,380 1,852,224
Other assets 8,800 15,840
Total Assets 4,230,700 5,609,588
Accounts payable 787,336 1,072,060
Notes payable 1,000,000
Mortgage payable 1,440,000
A, Capital 2,443,364
B, Capital 3,097,528
Total Liabilities & Equity 4,230,700 5,609,588
The partners agreed that the property, plant and equipment of A is under depreciated by 80,000 and that of B is over depreciated by 200,000. Accounts receivable of 108,000 in A's book and 140,000 in B's book are uncollectible. The partnership decided to assume the mortgage liability of B. The partnership agreement provides for a profit and loss ratio and capital interest of 60% to A and 40% to B. B is willing to invest or withdraw cash from the partnership to comply with the agreement. Compute for the capital balances of A and B right after the formation.
Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
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