Andrew, Berty and Clive, who carried on a partnership business, sharing profits in the ratio 2:2:1 respectively, have drafted their Statement of financial position as at 30 June 2012 as shown below:

The partnership was converted to a limited company on this date. The company, registered as Abec Ltd, took over all the assets and liabilities of the partnership on the basis of the following agreement:

(a) Property was taken over at its current market value of £550,000.

(b) Trade receivables were taken over subject to adjusting the allowance to cover 5% of receivables.

(c) Purchase consideration was discharged by an allotment to partners, in their profit-sharing ratio, of 1,000,000 ordinary shares of £1 each in Abec Ltd at 150p per share and a payment of £20,000 in cash. 

Required: 

Set out the accounts that need to be written up to convert the partnership books to those of Abec Ltd and the Statement of financial position of Abec Ltd on the day it opened its books of account.

Transcribed Image Text:

Statement of financial position as at 30 June 2012 Accumulated depreciation Property Furniture Motor vehicles Current assets: Inventory Trade receivables Less: Allowance for doubtful debts Cash and bank balance Cost 400 320 280 480 (15) (140) (112) 396 465 35 £'000 400 180 168 896 1,644