Fiona and Frank have been in partnership for many years, sharing profits in the ratio 2:1. Fiona decides to retire from the partnership with effect from 31 August 2000 and Fred is admitted as a partner on that date. The new partnership of Frank and Fred will share profits in the ratio 3:1.

The trial balance of the partnership as at 31 August 2000, before Fiona's retirement and Fred's admission, is as follows:

Further information: 1. Fred contributes capital of 16,000 on his admission as a partner. 2. On her retirement, Fiona takes her motor car at its book value of 7,150. She also withdraws 10,000 in cash. The remainder of the amount owed to her is left in the partnership as a long-term loan. 3. The partners have agreed that the value of the closing stock on 31 August 2000 is 4,500 and that trade debtors of 550 should be written off. 4. The freehold premises are valued at 85,000 on 31 August 2000 but should continue to be shown at cost in the balance sheet. 5. Goodwill is valued at 24,000 on 31 August 2000 but should not be shown in the partnership balance sheet. Required:

(a) Prepare a trading and profit and loss account and an appropriation account for the year to 31 August 2000.

(b) Make the necessary entries to record Fiona's retirement and Fred's admission to the partnership.

(c) Prepare a balance sheet for the partnership of Frank and Fred after these entries have been made.

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Dr balances Cr balances Capital accounts at 1 September 1999: Fiona Frank Current accounts at 1 September 1999: 23,000 29,000 Fiona 1,540 Frank 1,210 Freehold premises 55,000 Motor cars at written down value 13,850 Bank overdraft 9,820 Stock at 1 September 1999 5,440 Purchases 43,750 Sales 98,690 Operating expenses, including depreciation 21,860 Drawings: Fiona 15,100 Frank 10,300 Trade debtors and creditors 7,270 11,730 173,780 173,780