Majid and Mazin are partners sharing profits in the ratio of 2:1 respectively. They decided to dissolve the partnership as on 1st January 2020. On that day, their balance sheet was as follows;

Balance sheet of A and B as at 1^st January 2020.

Liabilities		Amount	Assets	Amount
		(OMR)		(OMR)
Sundry Creditors		5,000	Building	10,000
Reserve Fund Capital Account		5,000	Debtors	7,000
Majid	15,000		Stock	6,000
Mazin	10,000	25,000	Furniture	4,000
			Machinery Cash at Bank	2,000 6,000
Total		35,000	Total	35,000

1. Majid took over 60% of the stock at 10% less on its book value and the remaining stock was sold at a gain of 15%. Furniture and machinery realized for OMR 6000 and OMR 5000 respectively.
2. There was an unrecorded investment which was sold for OMR 4000.
3. Debtors were settled at OMR 6000.
4. There was an outstanding bill for repairs which had to be paid for OMR 1000.
5. Realization expense amounted to OMR 1000.

1. You are required to Prepare Journal entries (7 marks)

ii) What is the difference between retirement by sale of interest to another partner or an

outsider and retirement by sale of interest to the partnership? What are the effects of these

methods of retirement with regard to the partnership assets and partners equity?

(3 marks)