Reference no: EM132792559

Razul and Amy decided to start a partnership called SA Consulting on January 1, 2020. Each of them contributed a number of items to the partnership, which are listed below. All tangible assets are listed at their market value.

Razul

Cash $40,000
Equipment 190,000
Bank Loan80,000

Amy

Cash $60,000
Furniture 70,000
Accounts Payable 30,000

On March 1, Razul and Amy added a new partner to the business, Sheila. Sheila will contribute $100,000 and receive a 35% share of the business. Use the capital balances from January 1 to determine any bonuses. Assume the existing partners will split any bonus evenly.

During the year, Razul and Amy withdrew $20,000 and $15,000 respectively and the business reported a net income of $400,000. Their partnership agreement provided for sharing of net income (loss) on the following basis:

1. Salary of $60,000 is allocated to Razul, $50,000 to Amy, and $20,000 to Sheila.
2. Interest is allocated at 7% of each partner's opening capital balance.
3. Remainder is shared where Razul gets 40%, Amy gets 25%, and Sheila gets 35%.

problem a) Prepare the journal entries to record the contributions of each partner to start the partnership.

problem b) Prepare schedule showing the changes in capital and ending capital balances after the admission of Sheila.

problem c) Prepare the journal entry to record the admission of the new partner on March 1.

problem d) Prepare the journal entry to record the partner withdrawals of cash.