Fitch and Wall have been in partnership for many years sharing profits and losses in the ratio 5:3 respectively. The following was their statement of financial position as at 31 December 2016:

On 1 January 2017, they decided to admit Home as a partner on the condition that she contributed £12,000 as her capital but that the plant and machinery and inventory should be revalued at £16,800 and £6,100 respectively, with the other assets, excepting goodwill, remaining at their book values.
The goodwill was agreed to be valueless.

You are required to show:

(a) The ledger entries dealing with the above in the following accounts:
(1) Goodwill account, (2) Revaluation accounts, (3) Capital accounts;

(b) The statement of financial position of the partnership immediately after the admission of Home.

Transcribed Image Text:

3 Goodwill 12,400 Plant and machinery 16,320 28,720 Inventory 6,420 Accounts receivable 4,100 Cash at bank 626 11,146 Total assets 39,866 Sundry accounts payable (5,928) 33,938 Capital: Fitch 19,461 Wall 14,477 Total capital 33,938