Question

Nabeel & Thulaisi form a partnership to offer consulting services in Sydney. Nabeel contributes $250,000 in cash, and computer equipment that he bought last year for $60,000 that has a current market value of $50,000. Thulaisi owns a building that he previously used as part of his prior sole proprietorship. He bought it for $500,000 it has a carrying amount of $400,000 and a market value of $450,000. Provide the journal entries for the formation of the partnership.

Nabeel & Thulaisi make a profit of $250,000 in their first year of operations. Their partnership agreement states that the first $200,000 of profits and losses are allocated based on current capital contributions. The remaining profits and losses are split equally. Provide the journal entries to allocate the profit distribution.

At the start of year 2 Nabeel & Thulaisi are getting too busy to keep up with the demand of their clients. The partners agree to accept Terrence’s offer to join the partnership. Terrence pays $500,000 into the partnership for a 25% share of the capital. Nabeel & Thulaisi update their partnership agreement and agree to split any capital bonus from the admission of a new partner equally. Journalise the admission of Terrence into the partnership.

Answer 1

Journal Entries O Cash ore Dr. $250 000 Computer Mc Da $50 OBO To Nobeef & capital otc $300000 ( being cash & Computer bring by Nobeel) 2 Building arc Dz. $450000 To Thulaisi 18 Capitol arc $4,50 ore (being building bring by Thulaisi) 3 Ph2 on Dr $250000 To Nabeel arc $105000 To Thulaisi on $145000 (being Probit Distributed to the Portners) @ Cash ale Dr. $500000 To Terrence's topitol on $312500 To Nabeel is copitol onc $ 93750 To Thulaist is capital or $ 93750 ( being Admission of new Portmer and Distribution of capital bouns equally. in old Portner 18 Note & Computer & Building taken at the time of odmission at Market Volve Poutnership. in

Colculation of Shoring of Profit Nobeel is copitos contribution = 30000 Thulaisi 18 capital contribution = 450 at - Total Capitol = 75000 So Ratio = 3ooo! 4500 Distribution of Profit Nobech Thulasis Š X 200o = 8000 Xeco = 1200 FX+ 20000 CinCopitol Contribution) 2500 2500 9 Next sooro ce Nolly Probit $ 145000 Colulation of copitol bourg copitol before odmission = 750000 copitol bring by Neue Portmer . toto copitol 12,50, on New Portner's shore = 25%. 8o 25%. ob 125000 = $312500 so Capital bours = 5o as - 312500 = $187500 Distributed equally in old Portman's 80 capital boung = 187560 =$93750 to each old Portner