Arai and Andrew are partners in a printing business.They share the profit and loss of the business in the proportion of 3/5 and 2/5 respectively.They plan to expand the business and invited Aryan to participate in the partnership starting 1 January 2020.

The existing partners will share profits in the same ratios as before.Aryan needs to bring in cash of RM980,000 as capital in order for him to be entitled to one-quarter of the partnership's profits in the future.

The partnership's balance sheet of Arai and Andrew as at 31 December 2019 is as follows:

Arai and Andrew

Balance Sheet as at 31 December 2019

RM

RM

Non-Current Assets

Plant and machinery

1,180,000

Motor vehicles

820,000

2,000,000

Current Assets

Inventories

118,000

Trade receivables

698,000

Bank

85,600

901,600

Less:

Current Liability

Trade payables

585,000

316,600

2,316,600

Capital

Arai

1,296,600

Andrew

1,020,000

2,316,600

Upon the admission of Aryan, the existing assets of the partnership will be revalued as follows:

RM

Plant and machinery 1,200,000

Motor vehicles 885,000

Trade receivables 650,000

Inventories 129,000

Business goodwill of RM315,000 is to be kept in the book for future amortisation.

You are required to prepare:

a)The following ledger accountsin T-format for the purpose of the admission of new partner:

i.Revaluation account

(5)

ii.Partners' capital accounts

(4)

iii.Other related partnership accounts

(8)

b)Balance sheet after the necessary adjustments have been made.

(8)

c)Explain the concept of goodwill in a partnership.