Use the amended information from Exercise 29.6 as a starting point.

Dissolution information

1. On 1 January 20X2 the partners decide to form a company and issue £140,000 worth of shares in the company to the partners. They raise an additional loan (£60,000) and raise £70,000 in cash from the bank by way of an overdraft to enable the newly created company to purchase the partnership. The full £270,000 is to be used to purchase the assets and liabilities of the partnership, with the exception of the loan and the interest owing on the loan.

2. The shares and loan are to be divided between the partners as follows: Maraid (50 per cent), Wendy (25 per cent) and Diane (25 per cent).

3. The expenses associated with the conversion to a limited company are £3,500. These are payable by the partnership.

4. The partnership loan and interest owing must be repaid in full before the conversion takes place.

Required

a. Provide the relevant entries required for dissolution of the partnership (each partner will withdraw, or introduce cash to close their capital account). Prepare all the necessary ledger accounts, showing all workings.

b. Prepare purchase of business account and the statement of financial position of McKee Ltd as on 1 January 20X2 (the opening accounts in the new business are not required).