L & T Bar is owned by James Land and Larry Teague. They are running their business successfully. Now they have decided to expand their business by opening up another bar in the north part of town. For this purpose they need a partner, who can invest capital and has expertise. Currently, James and Larry’s salaries are $25000 each and they divide the remaining profit equally. They are willing to give equal share of the business to third partner for $142,000. They also agree to give a salary of $25000 and 1/3 of the profit.
Question no 1
Land capital 140,000
Teague capital 120,000
Cash invested by new partner 142000
Partners’ equity in new partnership 402000
Partners equity assigned to new partner 402000/3= 134000
Question no 2
19x1SalariesCapital DistributionTotal income
19x2SalariesCapital DistributionTotal income
19x3SalariesCapital DistributionTotal income
19x4SalariesCapital DistributionTotal income
19x5SalariesCapital DistributionTotal income
Total expected income is little bit more than expected total salaries. But on the other hand new partner has to invest $ 142000 cash for $ 134000 capital. So the new partner will pay cash as well as he will...