Brown and Jones are in partnership sharing profits and losses equally. The statement of financial position drawn

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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.


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Show the above changes in the revaluation account and partners’ capital accounts.

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Introduction To Financial Accounting

ISBN: 9781526803009

9th Edition

Authors: Anne Marie Ward, Andrew Thomas

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