Ghassan, Nael and Ghaith are partners in a solidarity company who share profits and losses in a
Question:
Ghassan, Nael and Ghaith are partners in a solidarity company who share profits and losses in a ratio of 6:4:2 respectively. On 1/1/2020, their capital balances amounted to 15,000 dinars, 25,000 dinars, and 5,000 dinars, respectively. On this date, the partner Ghassan decided to withdraw from the company, as the company’s assets were re-estimated to show them at their fair market value. As a result of the assessment, it was found that the fair market value of the lands owned by the company exceeds its book value by 6,000 dinars, and there is a need to make a provision for doubtful debts by 1,500 dinars. The asset values have been adjusted to reflect their fair values. The withdrawing partner, Ghassan, handed over 5,000 dinars in cash from the company. It was agreed that, as part of his share in the company, a car owned by the company would be transferred to him, with a value of 7,000 dinars. As for the remaining amount, it was agreed to pay it after six months, from the personal funds of the two partners, Nael and Ghaith, according to the ratios of distributing profits and losses.
Required:
1. Proof of the above in the company's books
2. Preparing the budget for the company after partner Ghassan's withdrawal
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker