Mary, Mark and Mike have been in partnership for many years, sharing profits in the ratio 3:2:1. Their balance sheet as at 31 December 1999 is as follows:

The partners decide to dissolve the partnership on 31 December 1999 and to sell the business to MMM Lid. The following information is available:

(a) The company agrees to buy all of the partnership's assets (apart from the bank balance) for £30,000 but does not take over the partnership's liabilities.

(b) The £30,000 consideration takes the form of £10,000 in cash together with 5,000 shares in MMM Ltd, valued at £4 each.

(c) Mary and Mike agree to divide the shares equally between them and to settle any remaining balance in cash.

(d) Mark is bankrupt and is unable to meet any of his liabilities.
Required:
Write up the realisation account, the partners’ capital accounts, the "Shares in MMM Ltd" account and the bank account.

Transcribed Image Text:

Fixed assets Goodwill Tools and equipment 3 25,000 8,340 33,340 Current assets Stock of goods for resale 7,910 Trade debtors 13,170 Bank balance 2,310 23,390 Current liabilities Trade creditors 8,730 14,660 48,000 Capital accounts Mary 36,000 Mark 3,000 Mike 9,000 48,000 48,000