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 2012:

On 1 January 2013, 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: (i) Goodwill account, (ii) Revaluation accounts, (iii) Capital accounts;

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

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