Fitch and Wall have been in partnership for many years sharing profits and losses in the ratio 5:3 respectively. The following was their balance sheet as at 31 December 2023:

On 1 January 2024, 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; and (iii) Capital accounts.

(b) The balance sheet of the partnership immediately after the admission of Home.

Transcribed Image Text:

Goodwill Plant and machinery Inventory Trade receivables Cash at bank Total assets Trade payables Capital: Fitch Wall Total capital 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