Lock, Stock and Barrel were in partnership sharing profits and losses in the ratio 3:2:1 respectively. Their Statement of financial position as at 31.3.2012 was prepared as shown. They decided to form a company to take over the business on the following basis:

(a) Lock would take over the investments, valuing them for the purpose at £95,000, and also take responsibility for the bank overdraft.

(b) LSB Ltd will take over the business as a going concern for a consideration to be discharged as follows:

■ Allotment to the partners, in their profit sharing ratio, of 800,000 ordinary shares of £1 each at 1.20p each;

■ Issue to Lock of £100,000 6% Loan note at par; and

■ Payment of £20,000 in cash. The decisions were carried out and expenses of dissolution were met at £3,000.

Required:

(a) Set out the closure of the partnership books.

(b) Assuming that LSB Ltd valued property and plant at £600,000 and took over the receivables subject to an allowance of 5%, set out LSB’s:

(i) Purchase of business account

(ii) The opening Statement of financial position.

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Statement of financial position as at 31 March 2012 Non-current assets: Property, plant Accumulated depreciation Investments Current assets: Inventory Trade receivables Cash and bank Capital - Lock - Stock - Barrel Current - Lock Stock Barrel Trade payable Bank overdraft 740 (280) 482 320 8 500 300 200 4 Cr 8 Dr 6 Dr £'000 460 80 810 1,350 £'000 1,000 (10) 328 32 1,350