QUESTION 2 20 MARKS
William and Paul own a business selling face masks and handsanitiser. They agreed that
profits will be spilt 80% to William and 20% to Paul and thatlosses will be split 50% to each of
them. They also agreed that before any profits or losses are splitPaul gets a salary and William
gets interest on his capital contributions. Paul gets a salarybecause he spends most of his time
in the shop dealing with customers. William only provided capitalto the business. William also
made an arm’s length loan to the business.
The partners provide you with the following information for theyear ended 30 June 2019:
Sales of trading stock for the business $330,000
Interest paid to William (Capital Contribution) $13,000
Salary to Staff of the business $75,000
Purchase of trading stock for the business $200,000
Opening Stock on 1 July 2018 $37,000
Closing Stock on 30 June 2019 $23,000
Interest paid to William (Loan) $5,000
Superannuation for Paul $9,000
Superannuation for Staff of the business $6,000
Required:
Calculate the partnership distribution for each partner for theyear ended 30 June 2019.
You must give reasons for your answer. Your discussion must includean analysis of the pertinent
sections of the relevant legislation, rulings, and the relevantcase law. If relevant, you must show
your calculation. You must apply the law to the facts and provideYOUR OWN analysis of the
issues and write a comprehensive answer to the question.
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