Question 1 -
Decision Case - The following questions relate to issues faced by partnerships.
Requirements -
1. The text states that a written partnership agreement should be drawn up between the partners. One benefit of a partnership agreement is that it provides a mechanism for resolving disputes between the partners. List five areas of dispute that might be resolved by a partnership agreement.
2. Loomis & Nelson is a law partnership. Don Loomis is planning to retire from the partnership and move to Canada. What options are available to Loomis to enable him to convert his share of the partnership assets to cash?
Question 2 -
Determining characteristics of a partnership and accounting for partner contributions
Jaylin Smith and Heff Talas are forming a partnership, Vintage Leather Goods, to import merchandise from Spain. Smith is especially artistic and will travel to Spain to buy the merchandise. Talas is a super salesman and has already lined up several department stores to sell the leather goods.
Requirements -
1. What is the purpose of the partnership agreement?
2. If the partnership agreement does not state the profit-and.loss-sharing ratios, how will profits or losses be shared?
3. Smith is contributing $215.000 in cash and accounts payable of $35.000. Talas is contributing a building that cost Talas $95.000. The building's current market value is $120,000. Journalize the contribution of the two partners.