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