A partnership business carried on by Gerenia and Petunia was acquired by Foliage Ltd with effect from 30 June 2012. Particulars of this acquisition are as stated as part of Activity 14.11.

Required: 

Set out the Purchase of business account in the books of Foliage Ltd and the Statement of financial position immediately upon acquisition of the partnership business.

Data from Activity 14.11:

After preparing their Statement of financial position as shown, Gerenia and Petunia sold their business, as a going concern, to Foliage Ltd, on the basis of the following valuations:

■ Land and buildings at £960,000

■ Motor vehicles at £90,000

■ Receivables subject to an allowance of 10%

■ Goodwill at £150,000.

Foliage Ltd undertook to discharge the purchase consideration as follows:

(i) allotment to partners in their profitsharing ratio of 1,500,000 ordinary shares of £1 each, in Foliage Ltd at 110p each; and

(ii) payment of the balance in cash. Dissolution expenses amounted to £5,000. Gerenia and Petunia have been sharing profits in the ratio 2:1.

Required: 

(a) The Realisation account and 

(b) The partner’s Capital accounts showing the closure of the partnership books.

Transcribed Image Text:

Statement of financial position as at 30 June 2012 Land and buildings Accumulated depreciation Motor vehicles Accumulated depreciation Inventory Receivables Allowance Cash and bank 480 (24) £'000 £'000 840 (196) 260 (156) 574 456 96 644 104 1,126 1,874