On 1st January 2020, Beckham, Giggs and Scholes decide to combine their sole trader businesses to form a partnership called "Merchandise United Ltd" (MU Ltd) which specialises in soccer merchandise and equipment. All the partners agree to contribute cash of $35,000 each. In addition, Beckham contributes a delivery van with a carrying value of $40,900 and fair value of $26,000 and a small storage space currently worth $45,500; and Giggs contributes inventory purchased a month prior for $51,600, with a current market value of $51,000. The partnership also assumes Scholes' accounts receivable of $66,400 along with the allowance for doubtful debt which is estimated to be $6,400 (this is believed to be reasonable as at the date the partnership is formed).. The partners decide to split the first $60,000 of the business's profits/losses equally, and any additional profits/losses in proportion to their initial capital contributions to the partnership. Unfortunately, MU Ltd took a hit due to the recent pandemic and thus the trio are not very successful in the first year and record a loss of $223,000. In addition, Scholes decides to leave the partnership and withdraws $100,000 from the business on his departure. Required: a) Journalise the distribution of the $223,000 loss in the first-year of the partnership. When calculating the partners' capital contribution percentages, round to 2 decimal places (example 22.53%) ( b) Journalise the departure (withdrawal) of Scholes from the partnership Note: No explanations are required to accompany the journals. Please distinguish between your responses to part a) and b)
On 1st January 2020, Beckham, Giggs and Scholes decide to combine their sole trader businesses to form a partnership called "Merchandise United Ltd" (MU Ltd) which specialises in soccer merchandise and equipment. All the partners agree to contribute cash of $35,000 each. In addition, Beckham contributes a delivery van with a carrying value of $40,900 and fair value of $26,000 and a small storage space currently worth $45,500; and Giggs contributes inventory purchased a month prior for $51,600, with a current market value of $51,000. The partnership also assumes Scholes' accounts receivable of $66,400 along with the allowance for doubtful debt which is estimated to be $6,400 (this is believed to be reasonable as at the date the partnership is formed).. The partners decide to split the first $60,000 of the business's profits/losses equally, and any additional profits/losses in proportion to their initial capital contributions to the partnership. Unfortunately, MU Ltd took a hit due to the recent pandemic and thus the trio are not very successful in the first year and record a loss of $223,000. In addition, Scholes decides to leave the partnership and withdraws $100,000 from the business on his departure. Required: a) Journalise the distribution of the $223,000 loss in the first-year of the partnership. When calculating the partners' capital contribution percentages, round to 2 decimal places (example 22.53%) ( b) Journalise the departure (withdrawal) of Scholes from the partnership Note: No explanations are required to accompany the journals. Please distinguish between your responses to part a) and b)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On 1st January 2020, Beckham, Giggs and Scholes decide to combine their sole trader businesses
to form a partnership called "Merchandise United Ltd" (MU Ltd) which specialises in soccer
merchandise and equipment.
All the partners agree to contribute cash of $35,000 each. In addition, Beckham contributes a
delivery van with a carrying value of $40,900 and fair value of $26,000 and a small storage space
currently worth $45,500; and Giggs contributes inventory purchased a month prior for $51,600,
with a current market value of $51,000.
The partnership also assumes Scholes' accounts receivable of $66,400 along with the allowance for
doubtful debt which is estimated to be $6,400 (this is believed to be reasonable as at the date the
partnership is formed)..
The partners decide to split the first $60,000 of the business's profits/losses equally, and any
additional profits/losses in proportion to their initial capital contributions to the partnership.
Unfortunately, MU Ltd took a hit due to the recent pandemic and thus the trio are not very
successful in the first year and record a loss of $223,000. In addition, Scholes decides to leave the
partnership and withdraws $100,000 from the business on his departure.
Required:
a) Journalise the distribution of the $223,000 loss in the first-year of the partnership. When
calculating the partners' capital contribution percentages, round to 2 decimal places (example
22.53%) (
b) Journalise the departure (withdrawal) of Scholes from the partnership
Note: No explanations are required to accompany the journals. Please distinguish between your
responses to part a) and b)
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