QUESTION 7 Eden and Stein were in partnership, sharing profits and losses in the ratio 2:1. Their abridged statement of financial position as at 31 March 20x5 was: ASSETS Equipment at carrying value Vehicles at carrying value Inventory Accounts receivable Bank EQUITY & LIABILITIES 5,600 Capital: E Eden 1,400 3,500 Current accounts: E Eden 6,500 1,500 Long - term borrowings |Accounts payable 5,000 4,000 2,000 (1,000) 3,000 5,500 18,500 S Stein S Stein 18,500 The partnership was sold to Diamond Ltd as a going concern. The company was incorporated with a registered capital of 20,000 ordinary shares of N$1 each. • The partnership paid N$450 and Diamond Ltd NS1000 for expenses for the transfer. The agreement was as follows: 1. Eden would take over one vehicle at book value, that is, N$800, and Stein would take over the other vehicle at NS1,100. 2. Diamond Ltd would take over all assets and liabilities with the exception of bank and vehicles. 3. The assets were taken over at these valuation amounts: • Goodwill • Equipment • Inventory at carrying value N$3,500 • Accounts receivable at carrying value less an allowance for bad debts at 10%. N$4,800 N$5,000 4. Diamond Ltd upon taking transfer would immediately pay off the loan. 5. Diamond Ltd would pay N$1650 in cash and the rest in shares. The shares were divided between Eden and Stein in the profit-sharing ratio. 6. The available cash would be divided between Eden and Stein in the profit-sharing ratio. The shares would between Eden and Stein in order to clear the outstanding capital accounts to nil. YOU ARE REQUIRED TO: 1. Draw up the realization account to show the necessary entries pertaining to the sale of the partnership. ( t 2. Draw up the capital accounts of the partners (in columnar form) in the general ledger.
QUESTION 7 Eden and Stein were in partnership, sharing profits and losses in the ratio 2:1. Their abridged statement of financial position as at 31 March 20x5 was: ASSETS Equipment at carrying value Vehicles at carrying value Inventory Accounts receivable Bank EQUITY & LIABILITIES 5,600 Capital: E Eden 1,400 3,500 Current accounts: E Eden 6,500 1,500 Long - term borrowings |Accounts payable 5,000 4,000 2,000 (1,000) 3,000 5,500 18,500 S Stein S Stein 18,500 The partnership was sold to Diamond Ltd as a going concern. The company was incorporated with a registered capital of 20,000 ordinary shares of N$1 each. • The partnership paid N$450 and Diamond Ltd NS1000 for expenses for the transfer. The agreement was as follows: 1. Eden would take over one vehicle at book value, that is, N$800, and Stein would take over the other vehicle at NS1,100. 2. Diamond Ltd would take over all assets and liabilities with the exception of bank and vehicles. 3. The assets were taken over at these valuation amounts: • Goodwill • Equipment • Inventory at carrying value N$3,500 • Accounts receivable at carrying value less an allowance for bad debts at 10%. N$4,800 N$5,000 4. Diamond Ltd upon taking transfer would immediately pay off the loan. 5. Diamond Ltd would pay N$1650 in cash and the rest in shares. The shares were divided between Eden and Stein in the profit-sharing ratio. 6. The available cash would be divided between Eden and Stein in the profit-sharing ratio. The shares would between Eden and Stein in order to clear the outstanding capital accounts to nil. YOU ARE REQUIRED TO: 1. Draw up the realization account to show the necessary entries pertaining to the sale of the partnership. ( t 2. Draw up the capital accounts of the partners (in columnar form) in the general ledger.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Question
Transcribed Image Text:QUESTION 7
Eden and Stein were in partnership, sharing profits and losses in the ratio 2:1. Their abridged
statement of financial position as at 31 March 20x5 was:
ASSETS
Equipment at carrying value
Vehicles at carrying value
Inventory
Accounts receivable
Bank
| EQUITY & LIABILITIES
5,600 Capital: E Eden
1,400
3.500 Current accounts: E Eden
6,500
1,500 Long - term borrowings
Accounts payable
5,000
4,000
2,000
(1,000)
3,000
5,500
18.500
S Stein
S Stein
18.500
• The partnership was sold to Diamond Ltd as a going concern. The company was incorporated
with a registered capital of 20,000 ordinary shares of N$1 each.
The partnership paid N$450 and Diamond Ltd NS1000 for expenses for the transfer.
The agreement was as follows:
1. Eden would take over one vehicle at book value, that is, N$800, and Stein would take over the
other vehicle at N$1.100.
2. Diamond Ltd would take over all assets and liabilities with the exception of bank and vehicles.
3. The assets were taken over at these valuation amounts:
• Goodwill
• Equipment
• Inventory at carrying value N$3,500
Accounts receivable at carrying value less an allowance for bad debts at 10%.
N$4,800
NS5,000
4. Diamond Ltd upon taking transfer would immediately pay off the loan.
5. Diamond Ltd would pay N$1650 in cash and the rest in shares. The shares were divided
between Eden and Stein in the profit-sharing ratio.
6. The available cash would be divided between Eden and Stein in the profit-sharing ratio. The
shares would between Eden and Stein in order to clear the outstanding capital accounts to nil.
YOU ARE REQUIRED TO:
1. Draw up the realization account to show the necessary entries pertaining to the sale of the
partnership. ( it
2. Draw up the capital accounts of the partners (in columnar form) in the general ledger.
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