PARTNERSHIPS

Question 1:

On Jan. 1, 2019 Fahd, Gaber and Tamer agree to start a partnership named Grand caf. The capital of the partnership is SR 90,000 and its divided between partners equally (the capital of each partner is SR30,000) the partner presented their shares of capital as follows:

Fahd presented SR30,000 cash.

Gaber presented the following assets: cash 10,000 Equipment SR20,000.

Tamer presented his proprietorship assets and liabilities as follows:

	Book Value	Fair Value
Cash	5000	5,000
Inventory	15,000	8,000
Equipment	40,000	25,000
Accumulated depreciation	10,000
Accounts payable	8,000	10,000

Required:

1. Prepare the required entries and the starting balance sheet.
2. The balance sheet at Jan. 1 2019 (statement of financial position)

Question 2:

Mohaned and Kamel are co-partners in the Alex Company. According to the partnership agreement the division of net income is as follows:

(1) Salary allowances of $8,000 to Mohaned and $6,000 to Kamel.

(2) Interest allowances of 10% on capital balances at the beginning of the year.

(3) The remainder profit is distributed equally.

Capital balances on January 1, 2020 were Mohaned $40,000, and Kamel $60,000.

The net income for 2020 is $40,000.

The drawings of Mohaned $4,000 and Kamel 5,000.

Required:

(a) Prepare a schedule showing the distribution of net income.

(b) Journalize the allocation of net income and closing the drawings.

(c) Compute the capital balances in December 31, 2020.

(d) Prepare the capital accounts.

Question 3:

Resolve question 2 assuming that the net income is $20,000.

Question 4:

Ali and Tamer Company is liquidated when its ledger shows the assets, liabilities, and equity accounts are reported as follows:

Assets		Equity and Liabilities
Inventory Accounts Receivable Cash Equipment Less: Accumulated depreciation	50,000 40,000 20,000 60,000 (20,000)	Ali, Capital Tamer, Capital Accounts payable	40,000 60,000 50,000
	150,000		150,000

Ali and Tamer Company agree to liquidate the partnership on the following terms. (1) The non-cash assets of the partnership will be sold to Alpha Co. for $150,000 cash. (2) The partnership will pay its partnership liabilities. The income ratios of the partners are 2:3, respectively.

Required:

1. prepare the required entries.
2. Prepare the schedule of cash payments.

Question 5:

Resolve question 4 assuming that the non-cash assets of the partnership will be sold for 100,000 cash.

Question 6:

1. state the characteristics of partnership.
2. state the main items in partnership agreement.
3. State the steps of liquidation.