Preparing a balance sheet and calculating profit Sergio and Samdecided to form a partnership on 1…

Preparing a balance sheet and calculating profit Sergio and Samdecided to form a partnership on 1 January 2013. They secured the services of a solicitor to draw up their partnership agreement as follows: i. Sergiois to contribute the following: • His vehicle, the fair value of which was $36000 • Plant and equipment valued at 84000 • Accounts receivable totalling $14400. ii. Samis to contribute the following: • Cash totalling $24000 • A building valued at $168000 • A mortgage of $96000. This was secured over the building and the partnership agreed to assume this liability. It was also agreed that Sergio would act as manager with an annual salary of $60 000, to be allocated at the end of each year. Profits and losses would be divided between Sergioand Samin the proportion 3/5 and 2/5 respectively. Gross profit for the year ended 31 December 2013 was $260 000, with operating expenses of $120 000. Sergiowithdrew $12 000 and Samwithdrew $16 000 during the year. Required a. Prepare the balance sheet of the partnership on its formation (1 January 2013). b. Calculate each partner s share of profit for the year ended 31 December 2013.

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