ADVANCED 27.5 Peter, Paul and Mary have been in partnership for several years sharing profits and losses in the ratio 1:2:3. Their last statement of financial position is as follows: Peter, Paul and Mary Statement of financial position as at 30 June 20X5 ASSETS Non-current assets Current assets Inventories Trade receivables Total assets EQUITY AND LIABILITIES Owners' equity Capital accounts -Peter -Paul --Mary Total equity Current liabilities Bank Trade payables 40,000 12,000 28,000 10,000 42,000 52,000 80,000 4,000 8,000 8,000 20,000 26,000 34,000 60,000 80,000 ADVANCED Total current liabilities Total equity and liabilities The partnership had become very dependent on one customer, Jefferson, and in order to keep his custom the partners had recently increased his credit limit until he owed them 36,000. Jefferson has just been declared bankrupt and the partnership is unlikely to get any money from him. Reluctantly, the partners have agreed to dissolve the partnership on the following terms: 1 The inventory is to be sold for 8,000. 2 The non-current assets will be sold for 16,000 except for certain items with a book value of 10,000, which will be taken over by Mary at an agreed valuation of 14,000. 3 The trade receivables, except for Jefferson, are expected to pay their accounts in full. 4 The costs of dissolution will be 1,600 and discounts received from trade credit suppliers are expected to be 1,000. 5 Peter is unable to meet his liability to the partnership out of his personal funds. Required Prepare the: a realization account b partners' capital accounts recording the dissolution of the partnership