Brown and Jones are in partnership sharing profits and losses equally. The statement of financial position drawn
Question:
Brown and Jones are in partnership sharing profits and losses equally. The statement of financial position drawn up on 31 March 20X9 showed the following position:
Brown retired as from 1 April 20X9 and at the same date Smith was admitted to the partnership. For the purpose of these changes, the premises were revalued at £115,000, fixtures at £68,000, inventory at £36,000 and goodwill was agreed at £90,000. An allowance for irrecoverable debts of £3,000 is also to be created. The new valuations are to be included in the business accounts, but no account for goodwill is to be maintained. In the new partnership, profits and losses will be divided in the proportion 3 : 2 between Jones and Smith, respectively. Smith will introduce cash of £100,000 and Brown is to receive payment for his capital in cash but no other cash is to change hands between partners in implementing the change.
Required
Show the above changes in the revaluation account and partners’ capital accounts.
Step by Step Answer:
Introduction To Financial Accounting
ISBN: 9781526803009
9th Edition
Authors: Anne Marie Ward, Andrew Thomas