Gerenia and Petunia, sharing profits in the ratio 2:1, respectively, have finalised their Statement of financial position
Question:
Gerenia and Petunia, sharing profits in the ratio 2:1, respectively, have finalised their Statement of financial position on 30 June 2012 as stated in Activity 14.11. Their business is sold to Foliage Ltd, on this date, valuing land and buildings and vehicles at £960,000 and £90,000, respectively. Trade receivables are to be taken over subject to 10% allowance for doubtful debts. The purchase consideration is to be discharged by:
(i) An allotment to the partners in their profit-sharing ratio of 1.5 million ordinary shares of £1 each in Foliage Ltd, at 110p per share; and
(ii) Payment of £88,000 in cash.
Dissolution expenses amounted to £5,000.
Required:
Close the books of the partnership.
Clue: No value has been attributed to goodwill. Therefore, the purchase consideration should be calculated by adding the values of whatever is received (shares and cash) from Foliage Ltd to discharge the purchase consideration.
Step by Step Answer:
Financial Accounting An Introduction
ISBN: 9780273737650
2nd Edition
Authors: Mr Barry Elliott, Mr Augustine Benedict