CSEC: May 2012 question#4

No. 3(a) (i): Preparation of opening entries to record each sole trader’s contribution to the partnership:
Workings
​Calculation of P’s capital:
Capital = Assets – Liabilities
Capital = (14,000+12,600+3,400+10,000+1,800) – (6,000+5,800)
Capital = 41,800 – 11,800 = 30,000.
 
Calculation of G’s capital:
Capital = Assets – Liabilities
Capital = (8,000+700+60,000+1,300) – (34,000)
Capital = 70,000 – 34,000 = 36,000.

Now that the capitals of both sole traders have been calculated, the general journal entries to record their contributions to the partnership can now be written up.

No. 4(a) (ii): Preparation of the summarized Statement of Financial Position for PG Enterprises, as at May 1st, 2012:

No. 4(b) (i): Calculation of each partner’s share of profit under the capital sharing ratio:

• P’s profit share = $99,000 x (30,000/[30,000+36,000]) = $45,000.
• G’s profit share = $99,000 x (36,000/[30,000+36,000]) = $54,000.

No. 4(b) (ii): Calculation of each partner’s share of profit using a ratio of 3:7;

• P’s profit share = $99,000 x (3/[3+7]) = $29,700.
• G’s profit share = $99,000 x (7/[3+7]) = $69,300.

No. 4(c): Two other features of a partnership that should be included in P and G’s partnership agreement, other than the profit sharing ratio are:

1. Whether or not the partners are entitled to salaries.
2. Whether or not interest is to be charged on drawings.

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