Tom, Dick and Harry were in partnership, sharing profits and losses in the ratio 3:2:1, respectively. Business profits have been falling consistently over the past few years and the partners have decided to dissolve the partnership with effect from 31 December 2014.

The business was sold to Sally plc The purchase consideration was $210,000, consisting of 100,000 ordinary shares of $0.50 each and $30,000 in 7 per cent debentures. The shares were divided in the profit-sharing ratio and the debentures were shared equally between the partners. The company took over the partnership's net assets with the exception of the bank account.

The statement of financial position of the partnership at 31 December 2014 was as follows.

Additional information at 31 December 2014:

• Dissolution expenses amounted to $1000.

• All cash transactions were processed through the business bank account.

Required

Prepare the following to show the closing entries in the partnership books of account:

a. A realisation account to dissolve the partnership

b. The partners' capital accounts

c. A bank account

d. The account of Sally plc.

Transcribed Image Text:

Non-current assets Premises at cost 70 000 Machinery at cost 50 000 Vehicles at cost 40 000 160 000 Current assets Inventory 8 000 Trade receivables 10 000 Bank 5 000 23 000 183 000 Capital acccunts Tom 110 000 Dick 50 000 Harry 21 000 181 000 Current labilities Trade payables 2 000 183 000