Ron, Stan and Frank are h partnership, sharing profits and losses equally. Their summarised statement of financial position at 31 March 2014 was:

Frank decides to retire on 1 April 2014. At that date goodwill is valued at $30 000 but goodwill will not be maintained in the books of account. After Frank leaves, Ron and Stan will share profits and losses equally. The partnership does not have enough cash to pay Frank when he leaves. The money due will, therefore, be repaid over five years.

Prepare:

a. The capital accounts of the partnership to record the retirement of Frank

b. The statement of financial position at 1 April 2014 to show how the balance due to Frank is recorded.

Transcribed Image Text:

Statement of financial position at 31 March 2014 $ Non-current assets 470 000 Current assets 50 000 520 000 Capital accounts: Ron 150 000 Stan 150 000 Frank 150 000 450 000