At the end of year three the partners decided to dissolve the partnership business. They shared profits
Question:
At the end of year three the partners decided to dissolve the partnership business. They shared profits and losses in the ratios 3:2:1 respectively.
The statement of financial position of the partnership immediately before dissolutions is shown in Table 2
Assets $
Premises 40 000
Furniture 10 800
Motor vehicles 11 600
Inventory 17 400
Trade Receivables 24 400
Cash 700
104 900
Equity and Liabilities
Capital Chiedza 30 000
Rutendo 20 000
Chenai 10 000
60 000
Current accounts
Chiedza 2 950(credit)
Rutendo 2 420 (credit)
Chenai (1 170(debit)
4 200
Non Current Liabilities
4 % Loan : Chiedza 6 000
Current Liabilities
Trade Payables 27 400
Bank overdraft 7 300
34 700 104 900
Notes
i. Some of the assets were sold as follows
$
Premises 41 600
Furniture 4 700
Motor vehicles 3 400
Inventory 16 200
ii. The partners took over the assets not sold as follows
Assets Value$ Partner
Furniture 4 000 Chiedza
Motor vehicles 4 700 Rutendo
Furniture 1 000 Chenai
Inventory 400 Chenai
iii. Trade Receivables owing $16 000 paid $15 040 in full settlement. Chiedza will collect the outstanding debts subject to a provision of 10% for the possible bad debts
iv. Trade payables amounts of $18 000 were paid $17 100 in full settlement. The balance due to the remaining trade payables was to be paid in due course
v. Chiedza was paid the loan plus the interest due
vi. The dissolution expenses amounted to $660
Figures should be rounded off to the nearest dollar
Required
Prepare the
i. Relisation account
ii. Partners’ capital accounts in columnar form
iii. Bank account
Intermediate Accounting
ISBN: 978-0324659139
11th edition
Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones