Ben, Barry and Becks have been in partnership sharing profit and losses in the ratio 3:2:1...

 

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Ben, Barry and Becks have been in partnership sharing profit and losses in the ratio 3:2:1 respectively. The Statement of Financial Position of the partnership as on 30 September, 2017 showed the following position: Equipment Buildings Goodwill Current Assets: Stocks Debtors Bank Less current liabilities - creditors Financed by: Capital accounts: Ben Barry Becks GHC 2,800 2,700 3,500 GHC 9,000 6,800 8,000 5,000 2,600 GHC 5,800 3,400 4,200 2.200 15,600 15,600 On 30th September, 2017, Barry retired from the partnership and Ben and Becks continued on the following terms: 1. In the new partnership, Ben and Becks are to share profit and losses in the ratio of 3:1 respectively. 2. Goodwill in the old partnership was to be valued at 4 years purchase of the weighted average profit of the last four years. The net profits of the last four years have been GHC1,450, GHC1,600, GHC1,650 and GHC1,800. No goodwill account is to be maintained. 3. The agreed capital of the new partnership was to be GHC 12,000. This was to be contributed in their new profit and loss sharing ratio. 4. Any receipts or payments required for the adjustment of the accounts of Ben and Becks are to be made in the partnership bank account. Required: show working of the determination of Goodwill and prepare Goodwill Account and Capital Accounts of the partners in a columnar form. (25 marks) Ben, Barry and Becks have been in partnership sharing profit and losses in the ratio 3:2:1 respectively. The Statement of Financial Position of the partnership as on 30 September, 2017 showed the following position: Equipment Buildings Goodwill Current Assets: Stocks Debtors Bank Less current liabilities - creditors Financed by: Capital accounts: Ben Barry Becks GHC 2,800 2,700 3,500 GHC 9,000 6,800 8,000 5,000 2,600 GHC 5,800 3,400 4,200 2.200 15,600 15,600 On 30th September, 2017, Barry retired from the partnership and Ben and Becks continued on the following terms: 1. In the new partnership, Ben and Becks are to share profit and losses in the ratio of 3:1 respectively. 2. Goodwill in the old partnership was to be valued at 4 years purchase of the weighted average profit of the last four years. The net profits of the last four years have been GHC1,450, GHC1,600, GHC1,650 and GHC1,800. No goodwill account is to be maintained. 3. The agreed capital of the new partnership was to be GHC 12,000. This was to be contributed in their new profit and loss sharing ratio. 4. Any receipts or payments required for the adjustment of the accounts of Ben and Becks are to be made in the partnership bank account. Required: show working of the determination of Goodwill and prepare Goodwill Account and Capital Accounts of the partners in a columnar form. (25 marks)

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Determination of Value of Goodwill is tabulated as under Year 1 2 3 4 Determination of Value of Good... View the full answer