9.5 Alpha, Beta and Gamma were in partnership for many years, sharing profits and losses in the...

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9.5 Alpha, Beta and Gamma were in partnership for many years, sharing profits and losses in the ratio 5 : 3 : 2 and making up their accounts to 31 December each year. Alpha died on 31 December 19X7, and the partnership was dissolved as from that date.

The partnership balance sheet at 31 December 19X7 was as follows:

Alpha, Beta and Gamma Balance sheet as at 31 December 19X7 Cost Aggregate Net book depreciation value

£ £ £

Fixed assets Freehold land and buildings 350,000 50,000 300,000 Plant and machinery 220,000 104,100 115,900 Motor vehicles 98,500 39,900 58,600 668,500 194,000 474,500 Current assets Stock 110,600 Trade and sundry debtors 89,400 Cash at bank 12,600 212,600 Less:

Current liabilities − trade and sundry creditors 118,400 94,200 568,700 Less:
Long-term liability – loan Delta (carrying interest at 10 per cent per year) 40,000 528,700 £ £
Capital accounts Alpha 233,600 Beta 188,900 Gamma 106,200 528,700 528,700 In the period January to March 19X8 the following transactions took place and were dealt with in the partnership records.
(i) Fixed assets £
Freehold land and buildings – sold for 380,000 Plant and machinery – sold for 88,000 Motor vehicles: Beta and Gamma took over the cars they had been using at the following agreed values:
Beta 9,000 Gamma 14,000 The remaining vehicles were sold for 38,000 (ii) Current assets Stock – taken over by Gamma at agreed value 120,000 Trade and sundry debtors:
Cash received 68,400 Remainder taken over by Gamma at agreed value 20,000 (iii) Current liabilities The trade and sundry creditors were all settled for a total of 115,000 (iv) Long-term liabilities Delta’s loan was repaid on 31 March 19X8 with interest accrued since 31 December 19X7 (v) Expenses of dissolution £2,400 were paid (vi) Capital accounts The final amounts due to or from the estate of Alpha, Beta and Gamma were paid/received on 31 March 19X8 Prepare the following accounts as at 31 March 19X8 showing the dissolution of the partnership:

(a) realization account;

(b) partners’ capital accounts;

(c) cash book (cash account).
Ignore taxation and assume that all partners have substantial resources outside the partnership.
(20 marks)
(ACCA, Paper 1, The Accounting Framework, June 1998)

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Introduction To Accounting

ISBN: 9780761970378

3rd Edition

Authors: Pru Marriott, J R Edwards, Howard J Mellett

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