9.1 Jupiter, Mars and Saturn are in partnership sharing profits and losses in the ratio 2 :...
Question:
9.1 Jupiter, Mars and Saturn are in partnership sharing profits and losses in the ratio 2 : 1 : 1.
The balance sheet of the partnership as at 30 June 1984 disclosed the following financial position:
£ £ £ £ £
Cost Dep. Net Capital accounts Fixed assets Jupiter 55,000 Freehold land Mars 32,000 and premises 80,000 – 80,000 Saturn 25,000 Equipment 15,000 6,000 9,000 112,000 Motor car 5,000 2,000 3,000 Current liabilities 100,000 8,000 92,000 Creditors 4,100 Bank overdraft 6,400 Current assets 10,500 Stock 24,000 Debtors 6,500 30,500 122,500 122,500 On 30 June 1984 it was agreed that the partnership should be dissolved as from that date.
Mars will continue in business on his own account; he agrees to take over the equipment, stock and debtors at valuations of £11,000, £26,000 and £6,100 respectively. He also agrees to purchase the freehold land and premises at an agreed valuation of £120,000, and obtains a bank loan over ten years of £90,000, to help finance the purchase. The proceeds are paid into the partnership. It is agreed that any balance owing by Mars at the finalization of the dissolution transactions will be charged to the capital account of Jupiter as the two parties have agreed that the balance owing by Mars and settled by Jupiter will represent a personal loan to be repaid by Mars, over a four-year period. Saturn agrees to purchase the motor car for £2,900.
Realization expenses amount to £1,500 and, together with amounts owing to creditors, are paid out of the partnership resources. All transactions were completed on 1 July 1984.
(a) The partnership realization account. (6 marks)
(b) The partnership bank account. (4 marks)
(c) The capital accounts of the partners. (7 marks)
(d) The balance sheet of Mars as at 1 July 1984, indicating what the balance on the capital account of Mars represents. (5 marks)
(Total: 22 marks)
(ICSA, Financial Accounting I, December, 1984)
Step by Step Answer:
Introduction To Accounting
ISBN: 9780761970378
3rd Edition
Authors: Pru Marriott, J R Edwards, Howard J Mellett