4. On 2 January 2013 Blue and Red decided to admit Grey on the following terms: a) The new partnership will continue to use the ledgers and journals previously used by Blue, Green and Red. b) Blue and Red are to contribute their existing assets (including goodwill) and liabilities at their fair market values agreed at the time of the retirement of Green. c) Grey's contribution to the new partnership would be R60 000 made up of: Cash R30 000 Creditors R4 000 Equipment R14 000 Goodwill R20 000 d) All assets and liabilities contributed by Blue, Red and Grey (except for goodwill) are to be recorded in the ledger of the new partnership at their fair market values. e) Goodwill is not to be reflected as an asset in the records of the new partnership. f) Grey is to receive one-fifth of the profits or losses in the new partnership and Blue and Red would share the remainder equally. The partners further decided to ensure that their capital accounts are in the new profit sharing ratio so Blue and Red adjusted their accounts by withdrawing or depositing sufficient to be in line with Grey's account REQUIRED: 1. Prepare the statement of changes in equity for the year ended 31 December 2012. (18 marks) 2. Prepare entries in general journal form, without narrations, to record the retirement of Green from and the admission of Grey to the partnership (24 marks) Blue, Green and Red have been in partnership as Coloured Wholesalers for a number of years and have always shared profits and losses in the ratio 2:2: 1. The partnership trial balance as at 31 December 2012, after some but not all closing entries had been recorded, was: DR CR Capital: Blue 55 000 Green N 000 Red 22 000 Current Account: Blue (01/01/12) Green(01/01/12) 8000 Radio/12) 1 000 Drawings: Blue 10 000 Red 18000 Long Term Loan 26000 Accounts Payable 12 000 Land and Buildings, cast Plant and Equipment 70 000 48 000 Accumulated Depreciation Equipment 18 000 Goodwill Inventory 12 000 Accounts Receivable 30 000 Provision for Bad Dots 20 000 1 000 Bank Profit and Less Summary(profit for the year 10 400 23400 219 400 219 400 Additional Information 1. Entries had not yet been made to record the following matters relating to the 2012 financial year: a) Partners are entitled to interest on fixed capital at the rate of 10% per annum. Blue had reduced his capital by R8 000 on 1 July 2010 - this was the only change to capital accounts made during the year. b) Partners are entitled to the following salaries for the year. Green R12 000 Red R18 000 2. The partnership agreement stipulates that: a) In determining the interest of a retiring or deceased partner, all assets must be valued at their fair market values at the date of retirement or death. b) The profit-sharing ratio of the remaining partners will not be altered QUESTION 1 (Cont). 3. On 1 January 2013 Green retired from the business. For the purposes of the retirement the partners agreed on the following: a) The fair market value of the assets at 1 January 2013 was R Land & buildings 100 000 Plant & equipment 43 000 Goodwill 40 000 Inventory 32 000 b) The existing book values of the tangible assets would remain unchanged in the ledger. c) Goodwill intangible asset) should not be recorded as an asset in the ledger d) Blue and Red would pay the balance due to Green from their personal accounts in profit sharing ratio. 4. On 2 January 2013 Blue and Red decided to admit Grey on the following terms: a) The new partnership will continue to use the ledgers and journals previously used by Blue, Green and Red. b) Blue and Red are to contribute their existing assets (including goodwill) and liabilities at their fair market values agreed at the time of the retirement of Green. c) Grey's contribution to the new partnership would be R60 000 made up of: Cash R30 000 Creditors R4 000 Equipment R14 000 Goodwill R20 000 d) All assets and liabilities contributed by Blue, Red and Grey (except for goodwill) are to be recorded in the ledger of the new partnership at their fair market values. e) Goodwill is not to be reflected as an asset in the records of the new partnership. f) Grey is to receive one-fifth of the profits or losses in the new partnership and Blue and Red would share the remainder equally. The partners further decided to ensure that their capital accounts are in the new profit sharing ratio so Blue and Red adjusted their accounts by withdrawing or depositing sufficient to be in line with Grey's account REQUIRED: 1. Prepare the statement of changes in equity for the year ended 31 December 2012. (18 marks) 2. Prepare entries in general journal form, without narrations, to record the retirement of Green from and the admission of Grey to the partnership (24 marks) Blue, Green and Red have been in partnership as Coloured Wholesalers for a number of years and have always shared profits and losses in the ratio 2:2: 1. The partnership trial balance as at 31 December 2012, after some but not all closing entries had been recorded, was: DR CR Capital: Blue 55 000 Green N 000 Red 22 000 Current Account: Blue (01/01/12) Green(01/01/12) 8000 Radio/12) 1 000 Drawings: Blue 10 000 Red 18000 Long Term Loan 26000 Accounts Payable 12 000 Land and Buildings, cast Plant and Equipment 70 000 48 000 Accumulated Depreciation Equipment 18 000 Goodwill Inventory 12 000 Accounts Receivable 30 000 Provision for Bad Dots 20 000 1 000 Bank Profit and Less Summary(profit for the year 10 400 23400 219 400 219 400 Additional Information 1. Entries had not yet been made to record the following matters relating to the 2012 financial year: a) Partners are entitled to interest on fixed capital at the rate of 10% per annum. Blue had reduced his capital by R8 000 on 1 July 2010 - this was the only change to capital accounts made during the year. b) Partners are entitled to the following salaries for the year. Green R12 000 Red R18 000 2. The partnership agreement stipulates that: a) In determining the interest of a retiring or deceased partner, all assets must be valued at their fair market values at the date of retirement or death. b) The profit-sharing ratio of the remaining partners will not be altered QUESTION 1 (Cont). 3. On 1 January 2013 Green retired from the business. For the purposes of the retirement the partners agreed on the following: a) The fair market value of the assets at 1 January 2013 was R Land & buildings 100 000 Plant & equipment 43 000 Goodwill 40 000 Inventory 32 000 b) The existing book values of the tangible assets would remain unchanged in the ledger. c) Goodwill intangible asset) should not be recorded as an asset in the ledger d) Blue and Red would pay the balance due to Green from their personal accounts in profit sharing ratio