Given the information for the four questions below: Following the high demand of coal from the European
Question:
Given the information for the four questions below: Following the high demand of coal from the European market brought about by the Ukraine/Russia conflict, Zola and Sell as partners in a coal company trading as Afri Mining upscaled their operations to take advantage of the high coal prices. They share profits and losses in the ratio of 3:1 respectively. Given the exponential growth in the business, they decided to liquidate the partnership and move the operations into a private company that is already exporting in the sector. The arrangement is such that the private company would acquire the assets of the partnership. They planned to expedite the process and liquidate the partnership simultaneously on 1 June 2022.
Before the liquidation entries were made, the trial balance of the partnership was prepared as follows:
Afri Mining
EXTRACT FROM TRIAL BALANCE AS OF 1 JUNE 2022
R
Capital – Zola - R808 500
Capital – Sello - R269 600
Current account – Zola R51 400
Current account – Sello - R25 800
Long-term loan - R246 100
Trade payables control -R64 800
Land and buildings at cost R1 165 500
Mining equipment at cost R259 100
Accumulated depreciation: mining equipment -R129 600
Bank R85 100
On 1 June 2022 the following transactions took place with regard to the liquidation:
1. The land and buildings were sold for cash R1 130 200
2. Mining equipment with a carrying amount of R60 000 was taken over (not paid for immediately) by Sello at an agreed cash amount of R70 700
3. The remaining mining equipment was sold for a cash amount of R107 300
4. On full settlement of the creditor's accounts, a settlement discount was received as the amount of R7 700
5. The long-term loan was paid in full
6. The liquidation costs which were paid amounted to R38 400
Question
Which one of the following alternatives represents the correct amount that must be allocated to Zola on as liquidation profit/loss of Afri Mining on 1 June 2022?
a. R 15 675
b. R 5 225 c.
R 13 125
d. R 4 375
Question
Which one of the following alternatives represents the correct amount that must be allocated to Sello as liquidation profit/loss of Afri Mining on 1 June 2022?
a. R 4 375
b. R 15 675
c. R 13 125
d. R 5 225
Question
Assume the correct amount of liquidation loss allocated is R99 000. Which one of the following alternatives represents the correct amount that must be paid to Zola on the liquidation of Afri Mining on 1 June 2022?
a. R 658 100
b. R 760 900
c. R 856 100
d. R 658 000
Question
Assume the correct amount of liquidation profit allocated is R60 000. Which one of the following alternatives represents the correct amount that must be paid to Sello on the liquidation of Afri Mining on 1 June 2022?
a. R 284 700
b. R 164 700
c. R 426 100
d. R 355 400
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford