BND Engineering is a partnership formed by Badrul, Naim and Daud in 2010. Its main business is providing engineering consultation works. They shared profits and losses in the ratio of 5:3:2respectively. In early December 2017, Badrul decided to retire as he is in poor health. Therefore, all the partners agreed to dissolve the partnership on 31 December 2017. On this date, the statement of financial position of the business was as follow:

Statement of Financial Position

As at 31 December 2017

RM

RM

ASSETS

Non-Current Assets

Building

180,000

Equipment

75,000

Vehicles

45,000

300,000

Current Assets

Debtors

75,000

Bank

168,000

243,000

TOTAL ASSETS

543,000

LIABILITIES & OWNERS EQUITY

Non-Current Liabilities

Loan from Badrul

12,000

Loan from Finance Company

30,000

42,000

Current Liabilities

Creditors

63,000

Bank Overdraft

48,000

111,000

Owners Equity

Capital Accounts

Badrul

240,000

Naim

90,000

Daud

30,000

360,000

Current Accounts

Badrul

15,000

Naim

6,000

Daud

9,000

30,000

TOTAL LIABILITIES & OWNERS EQUITY

543,000

Upon dissolution, the following transactions took place:

1.Building was sold for RM226,500. The proceeds were then used to settle the bank overdraft.

2.Equipment was realised at a loss of RM15,000.

3.Badrul agreed to take over the vehicles at 20% below book value.The loan from Badrul to the partnership was used as part of the settlement for the vehicles and the balance was paid by cheque.

4.All debtors paid their debts in full except for an amount of RM1,500 which was unrecoverable and was therefore written off as bad debt.

5.The amounts owing to the creditors were paid in full at a discount of RM3,000.

6.Dissolution expenses amounting to RM2,250 were fully paid.

7.All payments and receipts were made through the bank account.

REQUIRED:

(a)Prepare the following account to close the books of the partnership on 31 December 2017:

(i) Realisation account

(ii)Bank account

(iii) Partners' capital account

(b)Assume Naim and Daud agreed with Badrul's decision to retire from the partnership and decided to continue the business with the following arrangement:

(i)Badrul agreed to take over the vehicles at 20% below book value.

(ii)The building and the equipment were revalued to RM226,500 and RM60,000 respectively.

(iii)Badrul'scapital and current account balances will be settled by RM100,000 in cash and remaining balance as a loan to the partnership.

Prepare the journal entries to record the retirement of Badrul on 31 December 2017.