Partnership

Exercises A

You are required to identify the partners of the following businesses:

(1)Alan and Barry carry on the business of selling fruits. As they required more capital, they borrowed RM100,000 from Charlie. They also entered into a contract with Danny whereby Danny would manage their stall and in return, Danny would be paid 50% of the profits earned.

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(2)Alan and Barry carry on the business of selling fruits. As they require more capital, they approach Charlie who agree to invest in the business. Charlie agree to invest RM100,000. However, as Charlie will not be managing the business, they agree that Charlie will be paid only 25% of the profit earned. And in the event the business makes a loss, Charlie will be liable to contribute 25% of the losses. Alan and Barry also enter into a contract with Danny whereby Danny invests RM50,000. They agree to pay Danny 30% of the business' profit until the RM50,000 is fully repaid.

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(3)Alan and Barry carry on the business of selling fruits. As they require someone to help them manage the business, they enter into contracts with Charlie and Danny. Charlie will be paid 25% of the gross returns to manage their stall. Danny will be paid 50% of the profits earned.

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(4)Alan, Barry and Danny carried on the business of selling fruits. They used the firm name Alan, Barry & Charlie. Two years ago, Charlie passed away. Alan and Barry continue to carry on the business in the name Alan, Barry & Charlie. Alan and Barry pay Charlie's son, Danny, 20% of the firm's profit for the past two years.

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(5)Alan and Barry carried on the business of selling fruits under the name (Alan & Barry Fresh Fruits). They subsequently sold the business to Charlie for RM100,000. As Charlie continued to use the name A&B Fresh Fruits, Charlie agreed to pay them 10% of the profit. Two months ago, Danny paid Charlie RM80,000 as his contribution towards the business. Charlie and Danny agreed to share the balance of the 90% profit on equal basis. They also agreed to share losses on equal basis.

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Exercises B

1.The partners of the firm, ABK & Co, are Ahmad, Baba and Khairul. ABK & Co is in the business of selling toys. Ahmad placed an order for toys from Mari-Main Sdn Bhd for the sum of RM30,000. Discuss the following separately:

(a)Mari-Main Sdn Bhd has delivered the toys to ABK & Co. Baba and Khairul want to know whether they are liable to Mari-Main Sdn Bhd for the toys supplied to ABK & Co.

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What is your answer if their partnership agreement provides that Ahmad is prohibited from buying stock on behalf of the firm?

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(b)Mari-Main Sdn Bhd has delivered the toys to ABK & Co. However, as ABK & Co did not pay, Mari-Main Sdn Bhd sued Ahmad for payment. Ahmad paid RM10,000 to Mari-Main Sdn Bhd. Advice Mari-Main Sdn Bhd whether it can claim the balance of RM20,000 from Baba and Khairul.

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2.The partners of Fast Charge & Co were Michael, Nathan and Oliver. Fast Charge & Co purchased its stock in trade from Peter. A sum of RM80,000 still remained unpaid.

On 1 September 2020, Oliver sold his share in the business to Michael and Nathan and retired from the firm. Michael and Nathan agreed with Oliver that Oliver would no longer be liable for the debts of the firm, including debts incurred before his retirement. Oliver informed Peter of his retirement and that he would no longer be liable for the debts of the firm.

As Peter has not been paid the outstanding RM80,000, he takes legal action against Oliver. You are required to advise Oliver whether he is liable to Peter for RM80,000.

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3.The partners of Fast Charge & Co were Michael, Nathan and Oliver. Fast Charge & Co's regular supplier was Peter. On 1 September 2020, Oliver sold his share in the business to Michael and Nathan and retired from the firm.

Oliver informed Peter that he was no longer a partner in Fast Charge & Co. When Peter heard this, he stopped supplying goods to Fast Charge & Co. When the firm could not get supply, Michael and Nathan approached Oliver for assistance. For old time sake, Oliver then told Peter that he has now returned as a partner of Fast Charge & Co. When Michael placed an order for goods worth RM100,000, Peter delivered them to Fast Charge & Co.

Peter has not been paid the RM100,000. He wants to take legal action to recover the RM100,000.Who should Peter sue?

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